Italian Economy and Banking System

Transcript

1 Italian Economy and Banking System Luigi Di Martino Fabrizio Honisch UBI Banca Research Department

2 Topics Part I - Italian Economy General Overview GDP Evolution and Prospects Main Strenghts and Weaknesses Final Remarks and Conclusions Part II - Italian Banking System Italian Banking total assets The General Framework Lending and Funding Capital Ratios Final Remarks and Conclusion 2

3 3 Gross Domestic Product (GDP): an international overview

4 4 Eurozone vs World: population and GDP contribution

5 Gross Domestic Product (GDP): an international comparison in Euro 2013 GDP per capita of Lombardy = 33.9k and Piedmont = 28.5k (Est. Prometeia) 5

6 Italy: prospects of slow recovery of Italian GDP thanks to foreign trade and the moderate recovery in domestic demand Italian GDP should continue to benefit from the positive trend of foreign trade, as well as a slight improvement in domestic demand. Factors supporting the economy in 2014 could come from: the very accommodating monetary policy; the process of normalization of financial markets conditions; the gradual strengthening of foreign demand which reflects the expansion of the global economy; the recovery of business and consumers confidence in Italy. 6

7 7 Italy: improvement of the Italian trade balance in relation both to EU partners and to countries outside the EU

8 8 Italian exports have returned to pre-crisis levels thanks to the dynamics of trade with countries outside the EU

9 Contribution of Italian manufactured products world exports 2 nd in EU 3 rd in EU Within European Union, Italy is the 2 nd largest country by contribution of manufactured products world exports to country GDP and 3 rd by market share in manufactured products world exports. 9

10 10 Italy: progressive improvement in business confidence. Is a moderate upturn in industrial production starting?

11 11 Italy: the development of the Purchasing Managers Index could confirm the possible recovery in industrial output

12 12 The rebound of consumer confidence index recorded in 2013 could anticipate a slow recovery in household spending

13 Italy vs Euro : gross saving rate evolution In the recent quarters, the Italian households rate of savings both manufacturing and consumer households has grown shrinking the gap vs Eurozone recorded during the crisis. Savings increase, associated with the improvement in confidence, could anticipate a rise in consumption at a moderate pace. 13

14 14 Italy is characterized by a low level of Private Debt

15 Italy: households net wealth represents about 4.3 times Public Debt Source: Eurostat and Bank of Italy

16 Households net wealth in Italy: one of the highest in the world 2011 Households Net Wealth: an international Comparison (Households Net Wealth on Disposable Income) (X) USA Canada Germany Italy France UK Real Assets Net financial assets Source: Bank of Italy, Household Wealth in Italy, December

17 17 Forecasts on Italian GDP (% change YoY)

18 18 Primary Balance, Public Deficit & Debt: an international comparison

19 Long average residual maturity of Italian Public Debt Source: Bloomberg, elaborations by UBI Research Department 19

20 20 Italy: Primary Balance, Public Deficit & Debt

21 Italy has an important amount of State Assets to dispose Administration Estimated market value (bln/ ) Actual yield Target yield State 185 Real estate % 6.0% Equity interests % 7.4% Concessions/franchises % 6.3% Regions and local entities 386 Real estate % 6.0% Equity interests % 4.0% Concessions/franchises % 6.0% Total public administration % 5.7% Source: MEF, Relazione sulle Privatizzazioni, September

22 22 Italy: low productivity

23 23 Italy: shadow economy as a percentage of official GDP

24 Ranking by category Main advanced countries comparison (ranking from 1 to 185): the legal framework impact on the ease of doing business 2014 Country Paese France Germany Italy Spain Japan United Kingdom United States Ease of Doing Business - Rank Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency Source: Doing Business World Bank Survey 24

25 Italy: main strengths and weaknesses Within EU: 2 nd by manufactured products exports contribution to country GDP and 3 rd by world exports market share Households net wealth = about 4.3 times public debt and one of the highest in the world Low private debt Low productivity* ( 32.2 vs in Germany, 45.9 in France and 31.9 in Spain) High public debt (even if it is mostly owned by residents) Slow and complex legal system * Source: Eurostat. Q Labour productivity per hour worked 25

26 Italian Economy: final remarks and conclusions World economic growth is continuing its course in 2014 and also Italy should return to expand even if at a moderate pace. The recovery in our country is still fragile and the pace of expansion should be lower than the Eurozone. However, the economic outlook shows several signs of improvement from the qualitative and, partially, quantitative point of view. Positive factors Risk factors Favourable international context, which is giving a positive contribution to net exports. Easing conditions in terms of monetary policy and progressive improvement of the financial markets. Recovery and strengthening of both business and consumer sentiment. Financial soundness of Italian households vs European, that could support the slight recovery in domestic demand. The pace of growth will remain modest and lower than the rest of Euro area for several years because of structural problems whose solution will require a very long time (e.g., weak dynamics of productivity, high tax burden,...). During the crisis in Italy there has been a substantial loss of productive capacity due to cessations of business, outsourcing and relocation of production abroad by firms. In order to respect EU rules, there are prospective risks of correction measures on public accounts in the next years mainly based on optimistic" estimates about domestic growth. Possible slowdown of foreign trade contribution to GDP caused by a potential moderation in the pace of growth in emerging economies, as well as geopolitical tensions. In this sense, there could be a decline in demand for our exports and/or an increase in the price of raw materials. The Italian labour market is expected to remain weak for a long term, with obvious negative effects on the growth rate of households consumption expenditure. On the investments side, Italy continues to be considered not very favourable to carry out business activities and, consequently, to attract foreign investors, also according to the Doing Business survey of World Bank and the dynamics of foreign direct investments in recent years. 26

27 Italian Banking System vs European Union countries Italian Banking System is one of the widest within Europe 27 in terms of total assets. It counts more than euro 4 thousands billions. It s the forth behind United Kingdom, Germany and France. During the last few years it s decreasing, but at a lower pace respect to the most of the other European peers. 27

28 Ranking by total assets Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 28

29 One year change in total assets Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 29

30 ... and since 31/12/2006 Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 30

31 Evolution of italian banks total asset (31/12/2006=100) Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 31

32 Total asset and GDP 2013 Median = 2.7 Average = 3.4 Average (-Lux) = Median = 2.5 Average = 3.6 Average (-Lux) = in 2006 Source: ECB, Eurostat, Bloomberg, elaborations by UBI Banca Research Department 32

33 The main framework Italian Banking System is composed by 694 financial institutions at the end of 2013 (36 less respect to the end of 2012). It totalize more than 35 thousands branches with a reduction of more than 700 units since 2007 More than 30 thousands persons are employed in Italian banks. There re about 1850 persons for each branch, much less than in other European countries. 33

34 Inhabitants per branch at the end of 2012 and 2007 Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 34

35 Distribution channels % credit and debit card user 87% branches 11% phone banking 85% self service zone 89% traditional channels 10% 79% 65% in % 89% other channels 11% mobile banking 7% financial advisors 48% home / internet banking Source: Italian Banking Association (ABI) and GfK Eurisko 35

36 Lending activity to households and non financial corporations Total lending to Italian households and non financial corporations reached a level of about euro 1.4 trillion at the end of march. The actual amount is below to the pre crisis level still. The contraction between December 2010 and March 2014 is about 2%. Still, in the most recent months underline a gradual improvement of lending activity, in line with an improved economic environment. 36

37 Households and non financial corporations total lending (12/2010=100) Source: ECB, elaborations by UBI Banca Research Department 37

38 Lending activity to households based on destination 60% of lending to households is loans to house purchase and 10% is consumer credit. These percentages have changed just a little bit since the last recession. In particular, consumer credit collapsed during the period and lost ground respect to loans to house purchase, while others loans had been confirmed as a 30% of total lending. The three categories are below the last year level, even if the contraction is less deep. The last ABI report underlines a 20% YoY increase in new mortgages in the first quarter of

39 Lending to households (% change YoY)... and it s still weak consumer credit collapsed during the last recession... Source: ECB, elaborations by UBI Banca Research Department 39

40 Lending to households based on destination Source: ECB, elaborations by UBI Banca Research Department 40

41 Lending to non financial corporations / households (%YoY) Source: ECB, elaborations by UBI Banca research department 41

42 Credit quality The non performing loans increased a lot in the last five years. In the last quarter of 2008 they represented the 2.5% of total loans to customers. In the same period of 2013 are the 9.2%. Source: Bank of Italy, elaborations by UBI Banca Research Department 42

43 Funding Direct funding from retail customers totals 1.7 trillion at the end of April. Deposits are the 70% of total. Three years ago the share was 65%, both for the decreasing of bonds and for the increasing of deposits. This trend hasn t changed in the first four months of 2014: bonds lost 2.2%, deposits gained 0.8%. The funds from European Central Bank are decreasing in line with the improving condition of markets sentiment on non core sovereign debts and actually they re about 200 billion of euro. 43

44 Direct funding from retail customers composition The share of deposits is constantly increasing Source: Italian Banking Association (ABI), elaborations by UBI Banca Research Department 44

45 Direct funding from retail customers dynamic (31/12/2010=100) Declining in bond amount started in the second quarter of 2011 and it s not over yet Source: Italian Banking Association (ABI), elaborations by UBI Banca Research Department 45

46 Borrowing at ECB by main and long term refinancing operations Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 46

47 refinancing operations and total asset ratio Source: ECB, Bloomberg, elaborations by UBI Banca Research Department 47

48 Apr 08 Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 May - 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 Spread between lending and funding rates The spread between lending and funding rates tightened about 1.5% from 2008 and Still, during the last year it s widening again. 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Italian Banking Association (ABI) 48

49 Tier I ratio and Total Capital Ratio Italian banks in terms of Tier I ratio are in line with other Area euro peers as by Total Capital ratio. Source: Italian Banking Association (ABI) 49

50 Italian Banking System: final remarks and conclusions Italian banking system is mostly composed by traditional and domestic banks. It s one of the biggest banking system in Europe. During the last crisis, it suffered both for lending and funding activity. Balance sheet suffered the low spread between lending and funding rates. Non performing loans are still weighting on banks balance sheet. Anyway, There is the sign of an improvement in lending activity due to an increase in demand for loans. 50

51 Disclaimer Il presente documento è riservato al personale del Gruppo Ubi Banca ed a Clienti Professionali e Controparti Qualificate, così come definiti nel Regolamento Consob 16190/2007, individualmente identificati dalla Banca. Pertanto, la sua circolazione è strettamente limitata alle Unità Organizzative delle Società del Gruppo ed alla Clientela dalle medesime Società precedentemente individuate. È fatto, quindi, espresso divieto di mostrare e/o di consegnare a soggetti terzi ovvero di riprodurre, ridistribuire, direttamente o indirettamente, ovvero pubblicare il presente documento in tutto o in parte. Il presente documento ha finalità meramente illustrative ed è pubblicato a scopo meramente informativo. In particolare esso non contiene un giudizio della Banca, né si propone di sostituire il giudizio personale dei soggetti cui si rivolge né ha alcun intento promozionale e/o pubblicitario. Esso non costituisce né consulenza in materia di investimenti, né un offerta, né una sollecitazione, una raccomandazione o un suggerimento all acquisto, alla sottoscrizione o alla vendita di qualsiasi strumento o prodotto finanziario, all esecuzione di qualsiasi operazione o al perfezionamento di qualsivoglia contratto e/o accordo. Le informazioni e/o i dati in esso riportati non sono da intendersi quale ausilio in materia di decisioni di profilo giuridico, fiscale o altro. I dati, le informazioni e le notizie riportate nel presente documento sono già disponibili sul mercato finanziario e si basano su fonti esterne ritenute affidabili ma la Banca non può garantirne in via autonoma la qualità, la completezza e l attendibilità. Le informazioni contenute nel presente documento e le eventuali opinioni espresse dalla Banca possono essere oggetto di qualsiasi modifica o aggiornamento, senza alcun obbligo da parte della Banca di comunicare tali modifiche o aggiornamenti a coloro ai quali tale documento sia stato in precedenza distribuito. La Banca segnala che i passati risultati non sono garanzia dei futuri risultati e che non vi è alcuna garanzia che i futuri risultati o qualsiasi altro evento futuro saranno coerenti con le opinioni, previsioni o stime nel presente documento contenute. In ogni caso la Banca non assume alcuna responsabilità per gli eventuali danni diretti, indiretti o conseguenti, derivanti dall uso e predetti dati, informazioni e notizie. La Banca potrebbe avere uno specifico interesse riguardo agli strumenti e prodotti finanziari eventualmente citati nel presente documento. 51