March 12, 2020 / 10:25 AM / 20 days ago

Moody's flags risks for Italian banks from coronavirus crisis

MILAN, March 12 (Reuters) - Italian banks risk seeing a rise in problem loans and face pressure on revenues and liquidity due to a coronavirus emergency which is expected to have plunged the country into a recession, credit rating agency Moody’s said on Thursday.

Moody’s expects the Italian economy to contract by 0.5% this year, reversing a previous forecast for 0.5% growth.

The economic slump could fuel impaired loans and also make planned disposals more difficult to achieve.

“Banks’ profitability will come under pressure because of weaker lending activity, fewer fee-generating transactions, and higher cost of credit,” Moody’s said.

“The current difficult financial market conditions will likely force banks to put their funding programmes temporarily on hold, at least in part,” it added.

“This, combined with the moratoriums on loan repayments, will put pressure on their liquidity buffers.” (Reporting by Valentina Za, editing by Maria Pia Quaglia)

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