Italy Bank Stocks In Fresh Meltdown Over Toxic Loans, Italians Pulling Cash Out Of Banks Ahead Of Collapse… €200 Billion Bad Loan Time Bomb; Deutsch Bank Near Collapse; Announces €6.7 Billion Euro Loss
Italy bank stocks in fresh meltdown over toxic loans
Rome (AFP) – Italian banking stocks saw another day of meltdown Tuesday as skittish investors were spooked by the country’s burgeoning toxic loan crisis.
resh data showing non-performing loans hitting a new record high undermined confidence amid fears Italy’s already weak economy — struggling to recover from a three-year recession — would take a battering.
The world’s oldest bank, Banca Monte dei Paschi di Siena (BMPS), was hit hardest and was briefly suspended from trading following an equally bleak Monday which saw stocks plummet across the board.
News that the European Central Bank (ECB) was asking several banks — including BMPS, Banco Popolare and UniCredit — for data on their bad loans fuelled concerns the situation was spiralling out of control.
The shares in all six — including Carige, Banca Popolare dell’Emilia Romagna (BPER) and Banco Popolare di Milano (BPM) — fell for a second day running.
Italy Races To Defuse €200 Billion Bad Loan Time Bomb With “Bad Bank”
When Portugal “surprised” senior Novo Banco bondholders with a €2 billion bail-in late last month, the market got an unwelcome reminder that euro periphery banks are far from “solid.”
Novo was supposed to house the “good” assets salvaged from the wreckage of failed lender Banco Espirito Santo, but as it turned out, a lot of those “good” assets were actually bad, and Novo ended up needing to plug a €1.4 billion hole. Initially, the plan was to sell assets but seizing €2 billion from bondholders ended up being a whole lot easier and far more efficient.
News of the bail-in came just a week after Lisbon announced that a second bank – Banif – would need state aid after running out of cash to repay a previous cash injection from the government.
As we head into the weekend, periphery banks are back in the spotlight, only this time in Italy where PM Matteo Renzi is scrambling to put the finishing touches on a plan to guarantee hundreds of billions of NPLs sitting on the books of Italian banks.
Talks with the EU Commission “have already dragged on for two years,” FT notes and need to be concluded over the next few days lest “the whole initiative should collapse.”
Of course Renzi missed what amounted to a deadline on “fixing” the problem under the old rules governing bank resolutions.
One reason the Novo Banco and Banif bail-in and bailout (respectively) were pushed through in what appeared to be a kind of haphazard, ad hoc fashion was because new rules came into effect on January 1 that would have put uninsured depositors on the hook for losses. The same rules require 8% “of a bank’s liabilities to be wiped out before public money can be used,” FT adds.
In short, creditors at Italy’s banks would need to take a hit before Renzi’s government would be allowed to extend state aid. That is unless Italy can devise some kind of end-around, which is precisely what Renzi is attempting to do now.
Italians pulling cash out of banks ahead of collapse
The Italian financial meltdown that we have been waiting for has finally arrived. For quite a long time I have been warning my readers to watch Italy, and now people are starting to understand why. Italian banking stocks continued their collapse for a fifth consecutive day on Wednesday, and nervous Italians are beginning to quietly pull large amounts of money out of the banks. In particular, Monte dei Paschi is a complete and utter basket case at this point. A staggering one-third of their loans are “non-performing”, and the stock price has fallen a staggering 57 percent since 2016 began. Monte dei Paschi is going to need a major bailout, and the same thing could be said about almost all of the largest Italian banks. But where is the money going to come from?
As rumors of trouble at Monte dei Paschi spread, Italians are getting money out of the bank while they still can. The following comes from the Daily Mail…
Is Italy the next Greece?
Italy’s banks stocks are plunging, igniting fears over the strength of the long-troubled industry
Deutsch Bank Near Collapse; Announces €6.7 Billion Euro Loss
At the height of the financial crisis of 2008, Deutsch Bank lost €3.9 Billion; today the bank announced almost DOUBLE that loss, out €6.7 Billion last year! Is collapse coming?
The first annual balance sheet of the new German bank boss John Cryan falls into deep red. Simmering disputes and large-scale corporate restructuring has caused Deutsch bank to suffer the biggest loss in its history. Fears are now mounting the largest bank in Germany may FAIL!
The German bank has slipped even deeper than feared in the red. 2015 had accumulated after taxes due to high expenditure on litigation costs for the ongoing Group restructuring and job losses, a loss of about 6.7 billion euros, Germany’s largest bank announced.http://www.theeventchronicle.com/finanace/deutsch-bank-near-collapse-announces-e6-7-billion-euro-loss/?utm_campaign=coschedule&utm_source=facebook_page&utm_medium=The%20Event%20Handbook&utm_content=Deutsch%20Bank%20Near%20Collapse;%20Announces%20%E2%82%AC6.7%20Billion%20Euro%20Loss#
Banks admit to $1 TRILLION in “non-performing” loans; must be re-capitalized using depositor money thru bail-ins!
Mr White said Europe’s creditors are likely to face some of the biggest haircuts. European banks have already admitted to $1 trillion of non-performing loans: they are heavily exposed to emerging markets and are almost certainly rolling over further bad debts that have never been disclosed.
The European banking system may have to be recapitalized on a scale yet unimagined, and new “bail-in” rules mean that any deposit holder above the guarantee of €100,000 will have to help pay for it.