Economic lockdown and high debt holdings will put Italian banks at risk

Italian banks are set to see a rise in delinquency rates from out-of-work consumers and falls in mortgage balances, as the COVID-19 pandemic is having a severe impact on the country, says GlobalData, a leading data and analytics company.

Resham Karira, Retail Banking Analyst at GlobalData, says: “Mortgage balances are expected to be hit particularly hard due to Italy having a relatively high rate of self-employed workers, of 13%, and high mortgage penetration rates among them. As a result, GlobalData has revised its forecasts for mortgage balances to now decline at an annual rate of 3.1% in 2020, compared to growth of 1.0% previously.

Credit card balances are also expected to see declines. While there will be a rise in credit card transactions at the cost of a decline in cash, the overall impact on credit card balances in Italy will be negative, as consumers will spend less overall, preferring to focus on essentials to ride out the lockdown.

“Similarly, GlobalData expects retail deposits to see rises, due to predicted consumer behaviours. “Retail deposits are set to benefit from a flight to safety as consumers move away from risk assets, a move away from cash and government support to mitigate the impact of the shutdown.”

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