Traditional and online banks: the BTP issue

Traditional and online banks: the BTP issue

The performance of the Stock Exchange detects a delicate period both for online banks and traditional ones: the entire italian banking sector seems to be in difficulty.

In recent days, estimates of Italian banks have come down repeatedly by the main brokers while Credit Suisse believes that spreads are unsustainable, especially if new increases of capital for banks would take place. Another reason for concern is the Global Financial Stability Report of the International Monetary Fund, which speaks of a situation of high risk due to the presence of too many bonds issued by indebted countries.

Italy, with its uncertain political situation, brings the focus on the risky link between sovereign debt and the banking system. As we know, from the second half of 2018 the level of the spread has considerably increased and with it the riskiness of traditional and online banks. The problem is exacerbated by the over € 350 billion of BTP (Treasury Bonds with a long-term maturity), reflecting the serious exposure on the domestic market. The International Monetary Fund fears that market tensions may extend to other sovereign bonds in the European area, as happened during the Eurozone crisis.

In addition, the picture of the Italian banking sector is very complicated. Moreover, it gave the first bad signal already in May this year with the break of the long-term uptrend line.
Despite this, there is also some good news: a study carried out by the Head of the Banking and Financial Supervision of the Bank of Italy entitled “The Italian banking system: situation and prospects“, tells us that according to recent forecasts, Italian GDP should be on rates higher than 1% in the coming years. It is hoped that the consolidation of the economic recovery will allow to overcome part of the economic difficulties of the banks. Furthermore, a marginal flow of new impaired loans is expected, while the demand for loans from households and businesses will increase. The growth in disposable income could also make the demand for investment services increase. disposable income could also increase the demand for investment services.

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