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UniCredit well placed to weather Italian debt volatility – CFO

© Reuters. FILE PHOTO: Unicredit logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

MILAN (Reuters) – UniCredit (LON:0RLS) is well placed to withstand volatility in Italian government bonds, the group’s finance chief said on Wednesday, dismissing concerns about the impact of a recent widening in spreads with German debt.

The premium Italian bonds pay over safer German Bunds hit a two-year high this month, at more than 2 percentage points, as the European Central Bank (ECB) moves to tighten its ultra-loose policy, which has been a particular boost for indebted southern European countries.

As large holders of domestic government debt, Italian banks are exposed to falling bond prices, which can deplete their capital buffers.

However, UniCredit Chief Financial Officer Stefano Porro said on Wednesday the group had booked more than 55% of its 41 billion euros ($44 billion) in Italian government bonds among assets “held to collect” (HTC).

The HTC accounting classification of bonds prevents swings in their market prices from eating into lenders’ capital ratios.

Speaking at the Goldman Sachs (NYSE:GS)’ 26th yearly European Financials Conference in Rome, Porro said a 10 basis point widening in the asset swap spread of Italian bonds shaved only 2 basis point off UniCredit’s core capital ratio.

“In terms of sensitivity … not an important one,” he said. “And we’re not expecting to have any meaningful changes in the exposure, neither in the investment portfolio as a whole nor in the Italian government portfolio.”

Porro said he did not anticipate a structural widening in Italian bond spreads, stressing foreign investors held only a fifth of the overall debt and the ECB stood ready to counter unwarranted fragmentation in funding conditions among euro zone countries.

Asked about the impact of higher interest rates on the bank’s asset quality, the CFO said that close to 30% of the bank’s corporate loan book in Italy consisted of state-guaranteed loans.

($1 = 0.9314 euros)

UniCredit well placed to weather Italian debt volatility – CFO

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