Italy’s largest banks have repaid more than €120 billion of TLTRO loans previously granted by the ECB, which is gradually withdrawing pandemic-era stimulus.
UniCredit and Intesa Sanpaolo repaid €65 billion and €31 billion respectively. Following these repayments, UniCredit’s residual debt is €12.5 billion, while that of Intesa Sanpaolo drops to €45 billion.
Italian banks were the most dependent on these funds, intended to support the flow of credit in an economy hit hard by the Covid virus and related restrictions. While the banking industry is still awash in liquidity, the withdrawal of stimulus raises the question of where banks might seek more expensive funding.
“All the banks we reviewed have a strategy to replace their TLTRO funding, although some may face challenges in the current fragile market environment,” Supervisory Board chair Andrea Enria told European lawmakers.
It is estimated that Italian banks may need to raise around €35 billion in 2023, and another €75 billion to prepare for further TLTRO loan repayments next year. As a result, growing interest rate competition among banks could further reduce their interest rate margins.