Italian Bad Debt Hits Record $197 Billion As Bank Lending Contracts For Unprecedented 33 Consecutive Months

Tyler Durden's picture

Repeat after us: the biggest threat facing Europe's banking system is not a Grexit, is not the Austrian "bad bank" black swan (although it is pretty bad), it is the trillions in non-performing loans on the balance sheets of European banks, which Europe has no idea how to and which continue to multiply in the process threatening to impair depositors with bail-ins (see Cyprus). It is also why, after years of debate, the ECB finally agreed to flood European banks with what it hopes will be over €1 trillion in excess reserves a la the US (of course, if Zero Hedge, and now JPM, is correct, the ECB will break the bond market long before it achieves its goal) in order to mitigate the relentless cash demands of a constantly rising NPLs.

And unfortunately for the third largest issuer of sovereign bonds in the world, Italy - the country all eyes will focus on once Greece and/or Spain exit the Eurozone - when it comes to NPLs things are going from bad to worse because as Reuters reported earlier, citing ABI, gross bad loans at Italian lenders continued to rise, totaling 185.5 billion euros ($196.5 billion) in January from 183.7 billion euros a month earlier.

As the chart below shows, Italy now has over 10% of its  GDP in the form of bad debt.


But there has to be a silver lining though, right? If the banks are issuing loans with reckless abandon, at least many more loans are entering the general population right, something which also happens to be the biggest hurdle for ECB's clogged QE plumbing - the unwillingness of European banks to lend money.

Well, sorry, no silver lining, because as NPLs rose, total debt issuance contracted once more. Again Reuters:

Lending by Italian banks to families and businesses decreased 1.4 percent year-on-year in February, its 33rd consecutive monthly fall, even though the pace of decline is slowing, banking association ABI said. ABI said the February figure was the lowest rate of decline since July 2012.


Loans to households and non-financial companies had fallen 1.5 percent in January, a figure revised from a 1.8 percent drop announced a month ago.


Lending by Italian banks has been steadily falling since May 2012 as the euro zone's third biggest economy grappled with its longest recession since World War II.

That's ok, though, because all that needs to happen for banks to resume lending after nearly 3 years of consecutive declines in loan issuance, is for the ECB to start printing money. Because Draghi said so. Oh, and for Italy et al to change the definition of GDP once again so that economic growth under a Keynesian voodoo regime is no longer purely a function of how much credit is being created. Because across Europe, none is.

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ThroxxOfVron's picture

How do I short Italian BED Debt?

Osmium's picture

Not sure.  Is Bed debt from prostitution?

Headbanger's picture

Mamma Mia!

That's a spicy meat-a-ball!

PS.. No offense to fellow Pastafarians!

tarabel's picture



You do it with the sheets.

TruthInSunshine's picture

United States

All rockin' & rolling. Buy bonds, stawks & go shopping for discretionary crap, too. Charge it!

Harbanger's picture

You missed Austria, they're high on the list.

mtndds's picture

Transitory, Patience, BULLISH!!!

Kraut's picture

And I demand that Germany appears on this list. We must be among the top ten!

chilli sauce's picture
chilli sauce (not verified) ThroxxOfVron Mar 16, 2015 10:57 PM

my roomate's step-mother makes $79 hourly on the laptop . She has been fired for 10 months but last month her pay was $18694 just working on the laptop for a few hours. see here...

Kaiser Sousa's picture

What is "BED DEBT'?


just sayin...

Harbanger's picture

Paying for dates and not getting laid.

SmedleyButlersGhost's picture

It's called 68 - you do me and I owe you 1

NoDebt's picture

If it wasn't for bad debt, they'd have none at all.  I mean aside from the bed debt.  That's in its own category.


Kraut's picture

That is called "Cheat on a hooker" - pay and run away.

RobD's picture

"Bed debt" is that what it's called when you get your sleep number bed on credit?

KnuckleDragger-X's picture

Nothing to see here, after all, these are 'good' socialist, not like that evil Greece, who are 'bad' socialist.....

Kraut's picture

You mean "bed" socialist.


walküre's picture

The Vatican will cleanse anything "bad" and give absolution.

In goes the old bad and out comes the new good. There is a fee for this service of course.

Harbanger's picture

It's rumored that Benedict XVI cleansed the Vatican by taking zee gold to Brussels.

The Bell Rang's picture

Born under a bad sign

JustObserving's picture

All Western debts are simply too large to be paid off.  So interest rates must be kept negative as long as possible.

As soon as rates begin to normalize, if ever,  many countries will default.  

Edward Morbius's picture

So, when does the price of Barolo and Barbaresco come back to earth?

Chuck Knoblauch's picture

Does that include Vatican Bank?

observer007's picture


Which bank will collapse next?

Credit Default Swaps Info:

disabledvet's picture

NATO recruiting drive in 3...2...1..

El Gringo's picture

This is a clear sign of a bullish, er, I mean bullshit market.

shovelhead's picture

Everything's fine.

Bunga Bunga has been added to the GDP numbers.

NPL's drop to 5%.

Devon's picture

Rubbish article. The ECB has done numerous stress tests on the European banks and everything is fine. 

Signed MD

Anglo Hondo's picture

Have the Italians added the mafia protection money to the mix yet?  That's got to increase the GDP by a fair sum.

Or is that included in 'bed' debts, or even unexpected funeral costs?