Upbeat forecast for credit quality of Italian companies
(16 July 2015 – Italy) Moody’s Investors Service believes stronger credit quality of Italian companies will complement lower arrears in deals that bundle SME loans.
Moody’s vice president and senior analyst Valentina Varola said while regional inequality will persist, Northern Italy will outpace the rest of the country over the next year, as SMEs in the north generally have better credit quality than their southern peers.
"The crisis hit small Italian companies hard, but the north was comparatively more resilient.
“Italian non-performing loans (NLPs) reached €184 billion (A$272 billion) by the end of last year.
“New NPLs for Northern SMEs only accounted for 3 percent of total Italian SME loans, while their southern peers recorded a much higher value, at 5.3 percent", said Varola.
New NPLs for Italian SMEs will fall to 3.0 percent in 2016, from 3.7 percent at year-end 2014 (according to data from ABI and Cerved).
This has led Moody's to lower its average mean default assumptions for asset-backed securities (ABS) backed by Italian SME loans.
The rating agency's research shows that ABS portfolios with large geographical exposure to the north outperformed the segment.
NPLs will likely decline even further in the 33 Italian SME loan and lease ABS transactions that Moody's rates, than in the overall Italian SME universe.
The segment's outperformance is mainly because of originators' positive loan selection.
Moody's mean cumulative default assumption has averaged 18.3 percent for SME loan ABS deals that closed since 2013, with an average life of 4.6 years.
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