May 25, 2018 / 9:13 AM / 3 months ago

Italian government measures could erode banks' capital ratios- Goldman

LONDON, May 25 (Reuters) - Italian banks could see their capital ratios hit by up to 60 basis points by the new government’s economic measures, seen as likely to widen the budget deficit and increase national debt, Goldman Sachs said.

Italy’s banks index hit its lowest in 11 months on Friday, with shares in the country’s leading lenders UniCredit and Intesa Sanpaolo down more than 1.5 percent.

“We see three main near-term implications: (1) negative mark-to-market of sovereign holdings, (2) deferred tax assets impairments as a result of a lower corporate tax rate and (3) further write-downs on the NPEs [non-performing exposures] earmarked for sale under IFRS 9, if market conditions deteriorate,” analysts at the U.S. investment bank wrote.

The new government’s policies could have an estimated impact of 60 basis points of core equity tier 1 (CET1) ratios, they said in a note published late on Thursday.

Intesa and UniCredit were “better placed” due to their larger size, while smaller banks would be most affected, they said.

“The latest political developments may lead to further differentiation between the large players and the smaller banks,” they wrote. (Reporting by Helen Reid; editing by Danilo Masoni)

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