Italian Banks Report Higher Cost of Risk in Q1 2020 on COVID-19 Disruption
The Q1 2020 results of the main Italian banks showed the first negative impacts of the large economic and market disruption caused by the global COVID-19 pandemic. In particular, there has been an increase in loan loss provisions in the expectation of asset quality deterioration.In response to the outbreak, authorities and banks introduced several measures to support corporates and households, including the introduction of State guarantees on new loans and debt moratoriums. In our view, the combination of these initiatives, some of which are still unfolding, will help to contain the economic fallout, but it is unlikely they will prevent the build-up of new NPLs. In our view, the rise of new defaults will be more pronounced in 2021, once the moratoriums have expired.
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