MILAN, Nov 17 (Reuters) - International investors will steer clear of Italian impaired bank loans until prices fall to reflect the higher risks associated with the COVID-19 crisis, the head of the Italian arm of Norway’s Axactor said.
The Oslo-listed firm invests in and manages bad loans in six European countries.
In comments to Reuters, Axactor Italy CEO Antonio Cataneo said the pandemic had forced loan collectors to revise projections to reflect the fact that it will take longer to recover the loans and it may be more difficult given the downturn caused by the healthcare emergency.
After a hiatus caused by the first wave of the pandemic, Italy saw buoyant market activity, with bad loan prices supported by strong domestic demand. Cataneo said the second wave would leave a deeper mark.
“Up until September ... deals were closed with prices that weren’t that different from the pre-COVID situation,” he said.
“The risk associated with the pandemic at the time had not been fully factored in. We expect such risk will be included in portfolio prices going forward.”
The price investors in bad debts are willing to pay hinges on the costs they bear to secure financing and the returns they target, which rise in proportion to perceived risks.
International investors like Axactor face higher funding costs than many Italian rivals such as Banca IFIS which, as a bank, can tap cheaper liquidity.
Cataneo said Axactor and other international rivals had decided not to bid for some Italian bad loan portfolios because prices they were ready to offer were below those paid by Italian bidders.
“I’m not sure for how long the market can go on relying solely on domestic investors, even in a market like Italy where there is a strong local investor presence,” he said.
“At some point prices will have to come down to give international players the confidence to come back.” (Reporting by Valentina Za; Editing by Kirsten Donovan)