The Italian financial sector faces both strengths and risks that will be crucial for future growth. Strengths include high household wealth and savings, well-capitalized banks focused on retail and small/medium enterprises. However, risks include a lack of large global companies, a recession from 2009-2014 that led to high amounts of non-performing loans (NPLs), and a large physical banking infrastructure. NPLs totaled €360 billion or 23% of GDP due to the recession. Major restructuring of the banking system is expected in coming years through bank mergers and reductions in branches and employees to address the high levels of NPLs and improve competitiveness.

1. Italian
Financial
Sector
Crucial factor for growth

2. Strengths
• Italian household have high wealth
and saving attitude (1st in Europe)
• Well capitalized (exception: MPS)
• Simple business models: focused
on Retail and SMEs (>4m)
Risks
• Low number of top worldwide
companies (9 in Fortune 500)
• Physical distribution:
30k branches, 300k employees
• Impact of 6years recession (2009-
2014): High stock of NPLs
The Italian
Banking market
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Source: ABI, Covip, Borsa Italiana

3. The impact of 6 years of recession (2009-14): High stock of NPLs
The dead hand of bad debt
Italys NLP as Share of GDPNLPs by Region
Source: IMF, blackrock.com
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4. Impaired Loans: EUR 360bn due to recession (GDP decrease of 10%)
The dead hand? How bad is the debt?
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EUR 150bn
Past due &
Unlikely to pay
EUR 123bn
Loan Loss Provisions
(ca. 60%)
EUR 50bn
With additional real estate
collaterals worth EUR
85bn
EUR 37bn
With additional
personal guarantees
EUR 210bn
NLPs
on a gross basis
EUR 87bn
Net NLPs
+ +
Source: Bank of Italy, DB Research

5. 41,8
35,3
24,4
8,77,6
2,9
14,7
73,1
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
Germany Swiss Northern Europe Italy
Level 3 Assets NPL
Debt structure comparison of European Banks with Italy’s Banking system
Perspectives on hidden risks in toxic assets
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Source: R&S Mediobanca

6. Banking System Restructuring
• Significant number of banks
expected to be merged / bought in
the next 3 years
• No. of bank employees and
branches expected to be
significantly reduced in the next 5-
10 years
• Major restructuring costs
Digital and IT Investments
• Unicredit and Intesa already digital
leader in Europe (retail and SME)
• Leverage digital leadership in the
Mid Cap Corporate space
Future of the Italian
Banking system
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Source: ABI, Covip, Borsa Italiana

7. Jörg Buck
CEO
German-Italian Chamber of
Commerce (AHK)
Via Gustavo Fara 26 - 20124 MILANO
Tel. +39 02 67913.202
buck@ahk-italien.it
www.ahk-italien.it
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