Italian Banks’ Bad Loans Fall Sharply as Economy Rebounds

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The stock of bad debts held by Italian banks fell by a record amount in July, in a sign that Italy’s struggling financial sector is starting to benefit from stronger economic growth and greater investor interest, the Financial Times reported. The total volume of bad debts shrank by €18bn, or nearly 10 per cent compared with the previous month, to €173bn — the largest decrease since the Bank of Italy started to record data in 1998. The stock of bad loans is now at its lowest level since 2014. Italy’s stock of non-performing loans has weighed on banks over recent years, making it more difficult for them to extend new credit to customers. This has held back the country’s economic recovery, prompting concerns from domestic and European policymakers. The recent reduction in volumes comes alongside evidence of improving economic conditions in Italy, contributing to wider confidence in the eurozone’s return to economic health. In the second quarter of this year, Italy’s gross domestic product grew at its fastest annual pace since 2011. Read more. (Subscription required.)