Wednesday, September 27, 2023
HomeEconomyItaly's scramble for depositors' cash could threaten bank profits

Italy's scramble for depositors' cash could threaten bank profits


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by Valentina Za and Sara Rossi

MILAN (Reuters) – Italy will launch a new bond sale next week aimed at retail investors, targeting cash held in low-yielding bank accounts as It has found ways to make up for the reduction in the ECB’s bond purchases.

Market sources say the sale of new four-year BTP Valore (“BTP Value”) bonds could raise more than €5 billion ($5.5 billion) ) .

Stefano, professor of finance at Bocconi University, said: “The competition for liquidity is fierce. Liquidity used to be abundant and now Still available – but it will seek the best return,” Gatti said.

Italian residents hold about 2 trillion euros in deposits. In April, their average income was 0. percent, the Italian Banking Association said, compared with a total yield of about 3.6 percent on four-year BTP bonds.

leads to

difference between the cost of funds banks raise from households and businesses and the average interest rate they charge on loans base point.

Even though bank credit to households and businesses was halted last month as lending standards were tightened, such fat lending margins helped banks Quarters have recently made record profits.

In June, however, they need to pay back nearly half 25 billion euros of long-term ECB funds will be fully maturity317 .

With excess reserves insufficient to meet payments due, Bank of Italy warns banks will need to open up the market to borrow from the ECB in other more expensive ways or shrink assets.

This means that while the popularity of Treasuries among retail investors also poses challenges to asset managers and life insurers, it gives Banks pose a particularly vexing problem.

“There are large deposits offering very little or no pay,” Economy Minister Giancarlo Giorgetti said on Friday, discussing Rome’s debt strategy.

He added that the government is “clearly competing with the banks” when it comes to payment liquidity.

“It seems to me that it is natural and fair for the government to target the retail market,” Giorgetti said. success

Intesa Sanpaolo (OTC: 317ISNPY) calculates that the ECB will not be replaced purchased under its asset purchase plan when the second half of the year expires billion euros of Italian bonds, so the government renewed its efforts to attract domestic savers.

retail buyers in

of Provided Rome with a lifeline during sovereign debt crisis -318, when Italy needed to counteract the flight of foreign buyers. Expanded product design range For small investors, it will launch a new four-year bond from June 5th to 9th for holders Offers an upgrade coupon and a 0.5% loyalty premium for those with till maturity.

Roberto Rossignoli, Moneyfarm Portfolio Manager, said: “It is not difficult to predict that the initial issue of ‘BTP Valore’ bonds will be successful.”



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