ABI MONTHLY REPORT 1 July 2018 (Main evidence)

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1 ABI MONTHLY REPORT 1 July 2018 (Main evidence) LOANS AND DEPOSITS 1. In June 2018, loans to customers granted by banks operating in Italy, totalling 1,773.8 billion euro (cf. Table 1) was 37 billion higher than the total amount of customer deposits, totalling 1,736.4 billion euro (cf. Table 2). BANK LENDING PERFORMANCE 2. The data at 30 June 2018 show that loans to households and businesses were up yoy by +2.6%, confirming the overall positive trend of the total outstanding loans (the annual growth rate has been positive for more than 2 years). This result is derived from estimates based on data published by the Bank of Italy relating to loans to households and businesses (calculated including loans not shown in the financial statements of banks because they have been securitized and net of variations unrelated to transactions, e.g. changes due to fluctuations in exchange rates, value adjustments or reclassification) (cf. Table 1). 3. The latest official data available, which refer to the month of May 2018, confirm growth in the lending market. The total outstanding loans to households posted a +2.3% increase compared to May 2017, when there were already signs of improvement. LENDING INTEREST RATES 4. In June 2018, the interest rates applied to loans to customers were at record lows: the average rate on total loans was 2.60%, a record low (2.63% the previous month, and 6.18% prior to the onset of the crisis, at the end of 2007)(cf. Table 3). 5. The average rate on new transactions for house purchasing was also at record lows, at 1.80%, (1.83% in May 2018, 5.72% at the end of 2007). Approximately two-thirds of the total new loans are fixed rate. 6. The average rate on new business loans also reached a historic low of 1.37% (1.43% in the previous month; 5.48% at the end of 2007). CREDIT QUALITY 7. Net bad loans (i.e. net of the write-downs and provisions already made by the banks against own resources) in May 2018 remained more or less stable at The ABI monthly report makes available a series of quantitative information before any other survey regarding the same data. This is possible because the banks themselves have produced this information. 1

2 billion euro, falling by 1.7 billion compared to 50.9 billion euro recorded in the previous month, but fell sharply (by 37.5 billion euro) compared to the figure of December 2016 (86.8 billion euro, cf. Table 4). Therefore, in 17 months they fell by over 43%. Compared to the peak of net bad loans reached in November 2015 (88.8 billion euro), they fell by nearly 40 billion euro, i.e. by over 44.5%. 8. The ratio of net bad loans to total loans dropped to 2.84% in May 2018 (4.89% at the end of 2016). CUSTOMER FUNDING TREND 9. In Italy, deposits (current accounts, certificates of deposit, repurchase agreements) increased in June 2018, by approximately 88 billion euro compared to the previous year (an increase of +6.3%, yoy), while medium and long term funding, i.e. through bonds, confirmed a decrease of approximately 57.3 billion euro, in absolute terms, over the last 12 months (equal to -18.3%). The trend of total funding (deposits from resident customers + bonds) showed an increase yoy (+1.8%), in June 2018(cf. Table 2). Since late 2007, before the onset of the crisis, to date, customers deposits rose from 1,549 to 1,736.4 billion euro, an increase - in absolute terms - of nearly billion euro. INTEREST RATES ON DEPOSITS 10. In June 2018 the average interest rate on total bank funding from customers (the sum of deposits, bonds and repurchase agreements in euro from households and non-financial companies) in Italy stood at 0.73% (0.74% the previous month) as a result of: the rate charged on deposits (current accounts, savings deposits and certificates of deposit), equal to 0.40% (0.40% also in May 2018); the rate on repurchase agreements, which stood at 0.75% (0.74% in May 2018); the bond yield, equal to 2.49% (2.53% in May 2018; cf. Table 5). SPREAD BETWEEN THE LENDING RATE AND DEPOSIT RATE 11. The spread between the average lending rate and the average rate on household and non-financial companies deposits in Italy remains at particularly low levels, at 187 basis points, in June 2018 (189 basis points in the previous month) showing a sharp decrease over the more than 300 basis points prior to the onset of the crisis (335 basis points at the end of 2007). 2

3 Table 1 Lending of the banks in Italy (except interbank) * Total lending Private sector and PA * Private sector * Of which: to households and non-financial companies M yoy (1) M yoy (1) M yoy (1) Jun-16 1,816, ,550, ,412, Jul-16 1,809, ,544, ,409, Aug-16 1,799, ,536, ,405, Sep-16 1,804, ,541, ,406, Oct-16 1,797, ,536, ,405, Nov-16 1,801, ,541, ,410, Dec-16 1,802, ,540, ,399, Jan-17 1,801, ,536, ,404, Feb-17 1,801, ,536, ,405, Mar-17 1,807, ,540, ,405, Apr-17 1,797, ,530, ,400, May-17 1,801, ,534, ,404, Jun-17 1,795, ,525, ,390, Jul-17 1,772, ,503, ,371, Aug-17 1,760, ,489, ,360, Sep-17 1,762, ,490, ,357, Oct-17 1,760, ,491, ,360, Nov-17 1,771, ,502, ,371, Dec-17 1,762, ,501, ,355, Jan-18 1,775, ,511, ,372, Feb-18 1,765, ,501, ,362, Mar-18 1,773, ,506, ,362, Apr-18 1,771, ,506, ,367, May-18 1,768, ,504, ,366, Jun-18 1,773, ,508, ,372, Notes: latest month of SI-ABI estimates. * Including gross bad loans and reverse repurchase agreements. Private sector: non-financial companies, consumer and producer households, non-profit entities, other financial institutions, insurance companies and pension funds. The data are netted against central counterparties operations. (1) Variations recalculated to include loans not recognised in the bank balance sheets in that they were securitised and are net of variations not related to the transactions (e.g. variations resulting from exchange rate fluctuations, value adjustments or reclassifications) Source: Data processed by the Ufficio Analisi Economiche ABI on data of the Bank of Italy and SI-ABI 3

4 Table 2 Deposits and bonds from bank customers in Italy Funding (deposits and bonds) Resident customers deposits 1 Bonds 2 M yoy M yoy M yoy Jun , , ,23 Jul , , ,68 Aug , , ,43 Sep , , ,63 Oct , , ,60 Nov , , ,31 Dec , , ,93 Jan , , ,88 Feb , , ,28 Mar , , ,29 Apr , , ,27 May , , ,92 Jun , , ,56 Jul , , ,68 Aug , , ,16 Sep , , ,33 Oct , , ,16 Nov , , ,97 Dec , , ,98 Jan , , ,63 Feb , , ,07 Mar , , ,11 Apr , , ,09 May , , ,65 Jun , , ,34 Notes: latest month of SI-ABI estimates. 1 Deposits from ordinary private resident customers, excluding MFI and Central Public Authorities. It includes current accounts, preestablished term deposits, notice refundable deposits and repurchase agreements. The data are netted against operations with central counterparties, deposits with agreed maturity connected with receivables assignment transactions. 2 Recorded at nominal value and expressed in euro, they include subordinated liabilities and do not include bonds purchased from banks. They refer to resident and non-resident customers. Source: Data processed by the Ufficio Analisi Economiche ABI on data of the Bank of Italy and SI-ABI 4

5 Table 3 Italy: bank interest rates on lending and benchmark yields Bank interest rates on loans in euro to households and non-financial companies in Italy (Monthly average - % figures) Interbank rates for the Eurozone 3-Month interbank rates Of w hich: to Of w hich: to nonfinancial households for Benchmark the purchase of rate ECB 2 3-Month 10-year total 1 companies (new houses Euribor IRS transactions) (new USA Japan UK transactions) Jun Jun Jun Yields at the issue of Italian bank bonds (rate s initial term over 1 year) Jun Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Notes: for bank rates, latest month of SI-ABI estimates 1 Weighted average rate, data processed by Ufficio Analisi Economiche ABI. 2 End of period data Source: Data processed by the Ufficio Analisi Economiche ABI on data from the Bank of Italy and SI-ABI 5

6 Table 4 Bad loans in the Italian banking sector Net bad loans 1 Net bad loans on total lending 2 Net bad loans on capital and reserves May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 2 The figure for lending includes existing loans and net bad loans. 3 Before write-downs. M % figures % figures 84, , , , , , , , , , , , , , , , , , , , , , , , , Entry into force of the new regulatory statistic reporting requirements, starting in December 2008, determined a discontinuance of the historical series of net bad loans (at realisable value) due to the new reporting criteria for write-downs. Source: Data processed by the Ufficio Analisi Economiche ABI on data from the Bank of Italy. 6

7 Table 5 Italy: interest rates for investors Deposits in euro (Monthly average - % figures) Bank interest rates: households and non-financial companies Deposits in CA in euro (ESCB harmonised statistics) Repurchase agreements Bonds Funding (deposits, repos and bonds) 1 Gross yield of Government bonds in the secondary market BOT CCT CTZ BTP Yield at issue of postal deposits Ordinary savings books Average annual yield on 5th year Average annual yield on 20th year Jun Jun Jun Jun Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Note: for banking data latest available month for SI-ABI estimates 1 Weighted average rate, data processed by Ufficio Analisi Economiche ABI. Source: Data processed by the Ufficio Analisi Economiche ABI on data of the Bank of Italy and SI-ABI 7