While the recent picture for Italian banks has been improving, their asset quality and capitalisation are still generally weak.

The fortunes of Italy’s banking sector have improved in recent years, in line with a marginal amelioration of asset quality and higher capitalisation levels among some of the country’s banks. Nevertheless, notable exceptions to this trend remain and sizeable vulnerabilities still stalk the system as a whole.

This mixed picture is reflected in The Banker’s Top 1000 World Banks Ranking 2020 and, more specifically, in the best-performing banks table for Italian banks. Banco BPM heads the 10 largest banks in the country, with a score of 5.77 out of 10. This reflects its profitability gains over the review period, which were enough to secure first place among its peers based on this metric. The lender achieved the same feat with respect to its soundness ranking. 

Coming in a close second and third were Credito Emiliano (Credem) and Mediobanca, respectively. Credito Emiliano secured third place among the featured banks in terms of its growth, asset quality and liquidity metrics. But the lender fared less well in terms of its soundness ranking, where it came in ninth place.

Mediobanca, meanwhile, enjoyed a particularly strong profitability performance, where it achieved a score of 6.63 and second position among Italian banks based on this metric. Nevertheless, it had one of the lower liquidity scores and placed ninth among this cohort. 

Italy’s two largest banks, UniCredit and Intesa Sanpaolo, came in at fifth and sixth position on the best-performing banks ranking, respectively. UniCredit’s score of 7.46 on the soundness indicator, which placed it in second position, was accompanied by an operational efficiency ranking of third with a score of 7.42. Yet Italy’s biggest bank struggled in the growth and profitability indicators, where it achieved eighth place for both.

Intesa Sanpaolo, meanwhile, also enjoyed a robust score in terms of its operational efficiency by placing second with 7.67 out of 10. The bank’s weakest scores were registered under the return on risk and leverage indicators, where it secured seventh position among the featured banks.  

On the important question of asset quality – which is likely to come to the fore following the Covid-19 pandemic – only two lenders, Banco BPM and BancoPosta, achieved a score above 5. Meanwhile, the four lenders from positions seven through to 10 on the best-performing banks ranking had an asset quality score of less than 4.

This highlights the ongoing difficulties some banks face in addressing their asset quality weaknesses – a fact that may prove even more problematic over the coming year.


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