Loan Books at Large Italian Banks Contracted in 2024, With a Late-Year Rebound That Could Be Short-Lived Amid Tariffs

In this commentary, we analysed the lending data for the large Italian banks (Intesa Sanpaolo S.p.A., UniCredit S.p.A., Banco BPM S.p.A., BPER Banca S.p.A., and Banca Monte dei Paschi di Siena S.p.A.) over the 2023-24 period. We focused on trends for demand of loans and credit supply, the implications from the current economic environment, the role of state guarantees, as well as the potential impact of the ongoing banking consolidation.

Key highlights include the following:

-- Net loans at the large Italian banks fell by 2% YOY in F2024, although at slower pace compared to F2023.

-- The recent reduction in interest rates helped the pickup in new lending.

-- Banks' lending criteria remain selective, while demand for corporate loans is modest.

-- Lending prospects are moderate amid the uncertain economic environment and banking consolidation.

"Supported by the recent reduction in interest rates, we noted a pickup in lending origination in the second part of 2024, driven by higher demand for residential mortgages," said Nicola De Caro, Senior Vice President and Sector Lead, European Financial Institution Ratings." In our view, this trend likely persisted in Q1 2025. The demand for corporate loans, however, remained subdued reflecting the uncertain economic environment and heightened geopolitical risks. New tariffs on trade add more risks to future lending prospects."