...Large Legacy Impaired Portfolios: The stock of Italian banks' gross doubtful loans remains high and Fitch sees it as a drag on a more marked recovery of the banking sector. Gross doubtful loans almost doubled in 2011-2015 to EUR200bn by end-September. Impaired loans (including unlikely-to-pay loans) at Fitch-rated Italian banks averaged a high 20% of gross loans at end-1H15. Credem and MPS are outliers at 6% and 31%, respectively. But Impaired Loan Growth Declining: The rate of new impaired loans at Fitch-rated Italian banks is slowing. Doubtful loans ("sofferenze") grew by 13.3% yoy at end-September 2015, down from almost 18% at end-2014. Mitigants to Future Deterioration: Fitch expects impaired exposure to continue growing in 4Q15 and 2016 but at a much slower pace than in recent years. The recovery of Italy's economy (Fitch forecasts 1.1% real GDP growth in 2016) should be the main supporting factor. Tightened underwriting standards, revised risk controls and early intervention measures...
