UniCredit and Intesa Sanpaolo recently revealed differences over the ECB's provisioning guidelines, with the spotlight falling on non-performing loan recovery mechanisms. Speaking at IMN's Investors' Conference On Italian & European NPLs, representatives from the lenders also discussed their NPL strategies going forward.

Carlo Viola, head of strategies and solutions at Intesa Sanpaolo, observed: "Automatic provisioning has to take into account the quality of the recovery mechanism. For instance, we closed a consumer finance deal, which would take three years to close with the ECB's provisions."

Meanwhile, Jose Brena, md and global head of distressed asset solutions at UniCredit, suggested that his firm is "prepared for the outcome".

The ECB's addendum - announced on 4 October (SCI 4 October) - proposes a prudential provisioning backstop that will apply to new NPLs from January 2018. It requires banks to fully provision for unsecured NPLs over two years, with seven years allocated to secured NPLs.

Over the last two years, Intesa has executed 10 NPL transactions totalling €4bn. Disposals covered mainly unsecured, old vintage, widely worked portfolios. More recently though the lender has moved into the mixed/secured space, where it is currently working on two mid-sized secured transactions.

At the same time, UniCredit has been proceeding with its deleveraging through its €17.7bn NPL securitisation dubbed Project FINO (SCI 14 December 2016). The first phase has been finalised, which involved divesting a 51% stake in the portfolio, with UniCredit retaining a 49% stake. The managing-down of the stake is proceeding as planned and is on target to be below 20% by year-end 2017.

The Italian lender is now progressing to phase two of the project, having printed the €719.64m FINO 1 Securitisation notes. The bank will now apply for the GACS guarantee on the most senior tranche, which is rated A2/BBB by Moody's and DBRS respectively.

Looking ahead, Brena added: "We are now working on making saleable the unsaleable pieces in Project FINO. UniCredit aims to improve recovery through different channels, such as disposals, where it has been active. Asset segmentation is particularly important in this regard."

He continued: "The more you segment the assets, the better the outcome."

Regarding Intesa Sanpaolo's deleveraging strategy, Viola noted: "We are in line with ambitions of a 50% deleveraging target, assigned three years ago to the Capital Light Bank, our non-core business unit. The focus has been on internal workout, as well as on disposals."

He cited the establishment of a ReoCo and the fact that 85% of auctions are adjudicated by the market as further signs of progress. Intesa will continue to focus on internal workouts, with benefits expected from improved market conditions and the efficiency of the recovery process.

SP