Many Italian banks are struggling to borrow on the private markets and want European Central Bank (ECB) help as they seek more than 55 billion euros (US$63 billion) in funding this year.
Even after removing the threat of major collapses by bailing out some of its lenders, Italy’s financial system is ill-equipped to support an economy at risk of slipping back into recession.
Italy’s banks are still dealing with the bad debt left by the last downturn and another would risk new loans turning sour.
Political uncertainty has meant a spike in borrowing costs for Italian banks since an anti-austerity government took power last year, with only heavyweights UniCredit SpA and Intesa Sanpaolo SpA able to raise unsecured debt.
Bailed-out Banca Monte dei Paschi di Siena SpA last week said that the ECB had warned it about the challenge of raising money this year, highlighting a pinch that was evident in the third quarter of last year, when the Bank of Italy said that 200 million euros more in senior debt expired than was issued.
“Net issuance levels are truly worrying,” Banor Capital’s head of fixed income Francesco Castelli said.
Italian banks rely on about 240 billion euros of ultracheap, longer-term funds borrowed from the ECB in 2016 and 2017, but that source of funding is now shut and without replacing so-called targeted longer-term refinancing operations (TLTRO) funds, Italian banks would see a drop in their net stable funding ratio (NSFR), a long-term liquidity measure monitored by regulators.
ECB policymakers have said they are considering a new type of multi-year loans to avoid a potential liquidity shock.
“We think there will be something akin to a new TLTRO offer that could help mitigate the increase in banks’ cost of funding,” Luca Manzoni, head of corporate at Banco BPM SpA, Italy’s third-largest bank, told a recent event.
A senior executive at another Italian bank said that this year looked difficult and he too expects the ECB to step in.
The ECB declined to comment on whether it would offer new long-term financing for Italian banks, whose shares plunged on Tuesday after a source said it would make them tackle their existing problem loans in full by a set date.
From June this year, Italian banks will be forced to gradually exclude from NSFR calculations about 140 billion euros in TLTRO funds that are due to be repaid in June next year.
The head of funding at a large Italian bank highlighted the NSFR as one of the big hurdles this year, along with requirements to issue debt that can be wiped out to cover future losses.
He expects more Italian banks to follow UniCredit and UBI Banca SpA, the only two lenders to have issued so-called “senior non preferred” (SNP) bonds, riskier, costlier paper than can be used to meet loss-absorbing debt targets.
UniCredit, which is subject to tighter rules due to its size, last week paid 360 basis points over the swap rate to place a three-year SNP bond in the US.
Although less than the 420 basis point premium it paid last month on a similar five-year bond, it is a far cry from the 70 basis points paid a year ago on its first SNP bond and bankers said the market respite was temporary.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported record revenue of NT$416.975 billion (US$13.17 billion) for last month, putting the world’s largest contract chipmaker on track to set a record for quarterly revenue. Last month’s figure surpassed March’s record NT$415.19 billion and represented increases of 1.5 percent from April and 30.1 percent from a year earlier. For the first five months of the year, TSMC generated NT$1.96 trillion in revenue, up 30 percent year-on-year, it said in a statement. TSMC has forecast second-quarter revenue of between US$39 billion and US$40.2 billion, representing sequential growth of about 10 percent and year-on-year growth of about
PATENT PROBE: US lawmakers called for a ban on imports of chips made by TSMC if they are found to infringe on US patents, with a preliminary ruling expected soon Minister of Economic Affairs Kung Ming-hsin (龔明鑫) yesterday expressed confidence in Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) compliance with patent regulations after reports linked the company to a patent infringement lawsuit in the US. US Representative Ryan Zinke, and US senators Tim Sheehy, Roger Marshall and Bernie Moreno urged the US International Trade Commission in a May 22 letter to ban imports of chips made by TSMC if they are found to infringe on US patents, Axios reported on Wednesday. An administrative law judge is expected to issue a preliminary ruling this month, with the commission potentially making a final decision in
Infineon Technologies AG is preparing to open its largest single investment, a 5 billion euro (US$5.8 billion) semiconductor factory built with the help of EU subsidies, as the bloc seeks to boost chip production. The power chip fab, which is an extension of the German company’s Dresden campus, is scheduled to open on July 2, Infineon chief operating officer Alexander Gorski said this week at the site. The project is a major recipient of EU Chips Act funds, receiving about 1 billion euros in subsidies. The new plant represents a rare success for the bloc’s flagship semiconductor law, which was drawn up during
Taiwanese authorities are considering much stricter export controls on artificial intelligence (AI) chip sales to China to further align with US measures, according to people familiar with the matter, an effort to address semiconductor smuggling that risks drawing a rebuke from Beijing. The idea is to give authorities more legal tools to address diversion of advanced hardware, like AI servers with Nvidia Corp chips, from Taiwan to China. Such sales are already banned under US regulations unless companies get Washington’s permission, per curbs the US first imposed in 2022 to prevent Beijing from using advanced Nvidia processors to gain a military
RSS