ExpertEye European Automotive Report Q1 2017 | Page 20

Italy – Almost a quarter of all banks have a Texas ratio above 100%
.
The constitutional referendum result and the subsequent fallout has left Italy
in more political turmoil with an election due in the next 12 months. However,
the biggest threat to the Italian economy still lies within the banking sector.
The Texas ratio is a measure developed in the 1980s which identified that
when the value of non-performing loans “NPLs” exceeds the value of its
tangible assets and reserves, i.e. greater than 1:1 or 100%, then the banks
tended to fail. According to a new study by Mediobanca almost 23% of Italy’s
500 banks are above 100% and 24 of them are above 200%. Whilst some are
non-systemically important some including Monte dei Paschi di Siena (269%),
Venato Banca (239%) and Banco Popolare di Vicenza (210%). According to the
study, almost all of Italy’s large banking groups except Mediobanca, Intesa Sao
Paolo and Unicredit are above 100% and even the alter two are said to be
above 90%. State aid has already been pumped into some plus the Italian
government has also offered to compensate retail bond holders despite this
contravening EU legislation. It would seem that the EC is remaining tight
lipped on this issue with some speculating that they have been waiting to get
the French and German elections over with first to avoid fanning the populist
flames.
Looking at the economy overall Italy is set to see the lowest GDP growth in
2017 of all the EU member states. Job creation has been providing a stimulus
to private consumption however, a slowdown in employment growth and higher inflation is forecast to halve the rate of growth in 2017.
European Automotive Report - 2017 Quarter 1
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