UniCredit close to selling US$1.7b bad debt to Italy banks

[MILAN] UniCredit is close to selling bad loans with a face value of more than 1.5 billion euros (S$2.35 billion), signaling that the pandemic hasn't undermined a thriving market for Italian credit.

UniCredit is in advanced talks with Illimity Bank and Guber Banca to offload about 700 million euros of mostly unsecured non-performing corporate loans, according to people with knowledge of the matter.

Separately, the lender is close to finalising the sale of an 800 million-euro package of soured debt to Guber and Banca Ifis, the people said, asking to not be named because the discussions are private.

Representatives for UniCredit, Illimity, Ifis, Guber declined to comment.

The transactions, which may be finalised by the end of the month, are part of Milan-based UniCredit's ongoing effort to clean up its balance sheet and reduce risk. Despite the affects of the pandemic on borrowers, the bank reduced its non-performing loan ratio to 4.9 per cent as of March 31 from 5 per cent at the end of December.

The deals will be closely watched by peers seeking signs that the NPL market is still alive as they brace for a new wave of customers defaulting on mortgages, business loans and other debt because of the coronavirus. Earlier on Thursday, UniCredit said it reached an agreement to sell 335 million euros of bad loans to Banca Ifis in a separate deal.

The deals would be the first sales out of about 8 billion euros of NPLs that UniCredit is offering in several bundles, according to one of the people. They include about 2.5 billion euros of bad loans split between packages called Lisbona, Tokyo and New York; 3 billion euros of so-called unlikely-to-pay loans through the Dawn and Sandokan 2 initiatives and about 2.5 billion euros of leasing loans.

BLOOMBERG