Profitability and Balance Sheet Repair of Italian Banks
IMF Working Papers, August 19, 2016
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Bibliographic details
- Authors: Andreas Jobst, Anke Weber
- Published: August 19, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475527513.001
Overview and Purpose
- Authors: Andreas Jobst, Miss Anke Weber
- Date: August 19, 2016
- Publication: IMF Working Papers, Working Paper No. 2016/175, Issue: 175, Volume: 2016, Pages: 34
- DOI: https://doi.org/10.5089/9781475527513.001
- ISBN: 9781475527513
- ISSN: 1018-5941
- Summary objective: Quantitatively investigate the current and prospective earnings capacity of Italian banks through a bottom-up analysis of the 15 largest Italian banks.
Key Findings
- The banking system as a whole is on the whole profitable, based on a bottom-up analysis of the 15 largest Italian banks.
- There is significant heterogeneity in profitability across banks.
- Many banks should become more profitable as the economy recovers.
- Capacity of banks to lend depends on the size of their capital buffers.
- A number of smaller banks face profitability pressures, even under favorable assumptions.
- Improved profitability would enable banks to raise capital buffers and accelerate the cleanup of their balance sheets.
Drivers of Profitability (as identified)
- Strength of the ongoing economic recovery.
- Stance of monetary policy.
- Beneficial effects of current and past reforms, notably:
- Addressing structural obstacles to resolving nonperforming loans (NPLs).
- Fostering banking sector consolidation.
Risks and Constraints
- Persistent NPLs and structural obstacles to resolving them.
- Insufficient capital buffers limiting lending capacity.
- Heterogeneity implies some banks remain vulnerable even if aggregate indicators improve.
Policy Recommendations and Remedies
- Push ahead decisively on cleaning up balance sheets.
- Implement cost cutting and efficiency gains to improve profitability.
- Continue reforms to address structural barriers to NPL resolution.
- Foster banking sector consolidation to support system-wide resilience.
Subjects and Keywords
- Subject: Bank soundness, Banking, Countercyclical capital buffers, Distressed assets, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Loans, Nonperforming loans
- Keywords: asset quality, bank, bank consolidation, bank performance, bank profitability, Bank soundness, banks, book value, capital adequacy ratio, capital requirement, Countercyclical capital buffers, Distressed assets, Global, lending, Loans, nonperforming loans, profit and loss account, profitability, Reducing NPLs, SSM bank, Veneto Banca SCpA, WP
Source: "Profitability and Balance Sheet Repair of Italian Banks", IMF Working Papers 2016/175, Andreas Jobst and Miss Anke Weber, August 19, 2016.
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- Profitability and Balance Sheet Repair of Italian Banks