Italy's banks still have potential to cause difficulty

Updated / Wednesday, 25 Oct 2017 11:35

Peter Brown tells Brian Finn that Italy's banking system has suffered the same fate as the Irish banks

Shares in the bailed out Italian lender, Monte Dei Paschi di Siena, resumed trading on the Italian stock exchange today. The bank was temporarily delisted for a period of 10 months after it was forced to turn to Rome for a dig out when it failed to find an investor to keep it afloat.

Peter Brown, of Baggot Investment Partners and the Institute of Investment and Financial Trading, explained that the whole banking system in Italy had suffered the same fate as the Irish banks. "They have massive amounts of bad debts. We had a cleaning up of the balance sheets here and a recapitalisation. We've sold 25% of AIB and we've come full circle. Italy has dragged its feet. It's only in the last year that they put €50 billion in to recapitalise the banks but they still have €170 billion of bad debt. They're hoping for growth and a rise in interest rates to stabilise them," he said.


Mr Brown said new rules around bank bailouts introduced by the European Central Bank were treated in a very vague fashion when it came to the Italian banks. "In theory, 8% of any bailout has to be borne by depositors and bondholders. There was a massive stand-off between the ECB and Italian government but they went ahead and recapitalised the banks. They ignored the rules." 

The analyst said the banking sector in Italy, as well as in other euro zone countries, still had the potential to cause difficulty in the event of a downturn across the region. 

On the recent tracker mortgage scandal here at home, Mr Brown said it was now a moral issue for the banks. "I don't see any reason why they should be stalling. The banks have been recapitalised. It could be sorted out. They need to step up and take a moral responsibility and pay the money," he concluded.

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MORNING BRIEFS - AIB has issued a statement in response to the Irish Times front page story which says that the thousands of fixed rate mortgage customers may have been unfairly excluded from the bank's tracker redress scheme. AIB said the Central Bank review is ongoing and any customer covered by the terms of the review will be included. It - and other banks - are due to issue detailed statements today.

*** The Minister for Finance has said the State could face fines after failing to establish a special holding account for the €13 billion we are supposed to collect from Apple in the form of back taxes. Paschal Donohoe told the Dáil that this escrow account would be set up as soon as possible, but he could not definitively say when the money would be collected. The Department is in talks with an investment manager about maintaining the account. The original due date for payment was last January.

*** A first estimate of economic growth in the UK for the July to September period is due out today. The expectation is for growth to come in around the 0.3% mark - the same as the first two quarters.

*** Lloyds Banking Group has announced a sharp rise in third quarter pre-tax profit. Profits came in at £1.9 billion, up from £811m in the comparable three months last year but below expectations.