MILAN (Reuters) - Popolare di Sondrio (BPSI.MI) said the European Central Bank had blocked its acquisition of a smaller rival and told the regional Italian bank to clean up its balance sheet first.
As of June 30, impaired loans at Popolare di Sondrio accounted for 13.7% of overall loans. That compares with an average of 9% for Italian banks, which have managed to halve their soured loan ratio from a peak of 18% in 2015.
Popolare di Sondrio said in August it would sell 1 billion euros’ ($1.1 billion) worth of bad loans to lower their share of total lending to around 8% by 2022.
“As part of discussions with the ECB ... to approve the acquisition of Cassa di Risparmio di Cento, the need emerged to give priority to de-risking initiatives to reduce non-performing loans - using the bank’s significant capital buffer for this purpose - as well as to strengthening governance and risk management,” the bank said late on Thursday.
Popolare di Sondrio said it had informed the sellers that it was unable to proceed with buying Cassa di Risparmio di Cento.
“Banca Popolare di Sondrio will concentrate in coming months on implementing the disposal plan and strengthening (debt) recovery activities,” the bank said.
Andrea Mandalà; Editing by Elaine Hardcastle