...Negative Outlooks Still Dominant: Fitch Ratings has maintained the Negative Outlooks on five of the eight Italian medium-sized banks it rates, after a peer review. These banks represent around 8% of Italian banking system assets. Most of them have recently undertaken capital strengthening measures, but these were not enough to compensate for further deterioration in asset quality and structurally weak profitability in their commercial businesses. Traditional Business Models: Italian medium-sized banks are all regional, most of them cooperatives, with business models tilted towards SMEs and households. This exposes them to domestic and local macroeconomic dynamics. Economic Environment Still Unsupportive: The domestic economy has gradually been stabilising, with flat GDP growth rates, stagnant, but no longer contracting, lending volumes and decelerating impaired loan formation. However, this stabilisation has not yet translated into a supportive environment for individual banks' credit profiles....
