MILAN, Nov 13 (Reuters) - Lower-than-expected provisions against loan losses supported Italian banks' earnings in the third quarter, which saw the economy rebound strongly after restrictions to fight COVID-19 were lifted. The top two lenders Intesa Sanpaolo and UniCredit have already said they will significantly increase provisions in the fourth quarter as the sector braces for potential losses once the government starts unwinding measures deployed to help businesses through the pandemic. Economic activity has been hit by fresh restrictions to stem contagion as Italy battles a second virus wave. "Italian banks' third-quarter earnings were positive on average. But the length of the current crisis is the big question mark hanging over the banking sector," Marco Giorgino, professor of Financial Markets and Institutions at Milan's Politecnico University, said. "The cost of risk at Italian banks has doubled on average due to COVID and further writedowns are likely in the fourth quarter." Banks have frozen payments on 301 billion euros ($355 billion) in loans to businesses and households and extended 103 billion euros in state-guaranteed loans to small- and medium-sized enterprises. Following is a summary of provisions booked by banks in the January-September period, the latest figure on loans under moratorium and the outlook for loan losses in 2020-2021. All figures in euros. COVID-related Total loan Guidance Guidance Loans Gross provisions loss on cost of on cost of under impaired against loan provisions risk (*) risk for moratorium loans/tota losses in in for 2020 2021 l loans Jan-Sept Jan-Sept Intesa 1.3 bln 2.7 bln Up to 90 Up to 70 48 bln 6.9% Sanpaolo bps bps (including (excluding (excluding UBI Banca) UBI Banca) UBI Banca) UniCredit 1.7 bln 2.9 bln 100-120 Lower end 29 bln 4.7% bps of 70-90 bps range Banco BPM 140 mln 801 mln 100 bps -- 15.6 bln 8.6% (**) BPER Banca 91 mln 406 mln 100-110 -- 11.5 bln 8.8% bps Monte dei 300 mln 621 mln -- -- 15.4 bln 11.1% Paschi (***) (*) Cost of risk measures loan loss provisions against average loan volume in a given period. (**) Pro-forma 7.7% including a planned 1.2 billion euro disposal. (***) Pro-forma 4% including a planned 7.5 billion euro spin-off. ($1 = 0.8473 euros) (Reporting by Valentina Za and Andrea Mandala;Editing by Elaine Hardcastle)
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