Banks in good health: solidity and profitability growing, but with an eye on risks. The Bankitalia report

Il Italian banking system it is in good health, with profits still solid in 2024, although growth will slow a bit in the next two years. Problem loans are on the rise, but don’t panic: the situation will not return to the critical pre-pandemic levels. Banks are well capitalized, but will have to continue to keep an eye on risks related to security and operational management. This is what emerges from the Second report on financial stability of the Bank of Italy, which paints an uncertain scenario but not without signs of hope.

Economy 2024: Slow Growth and Modest Forecast for 2025

In 2024, theworld economy has seen one slow growth, And the forecasts for 2025 are not much rosier. Although the dynamics may differ from region to region, the war in Ukraine, the Middle East and rising global geopolitical tensions continue to weigh on economic stability.

Despite global difficulties, the financial markets have benefited from more accommodative monetary policies, although they remain vulnerable to risks related to the high level of public debt in many countries and persistent economic uncertainty. In the United States, the presidential elections have had an impact on investors’ choices, who have redistributed their portfolios, moving investments from government bonds to equities. Although there are signs of more flexible management, the situation remains unstable.

Italy: Stability with some unknowns

In Italy, 2024 saw an overall macroeconomic picture stable, although not without risks. Persistent geopolitical tensions and the fragility of the global economy continue to weigh on the growth, but the prospect of lower interest rates could give the economy some lift.

Il financial market national, overall, is in good health. The spread between Italian and German government bonds has narrowed, a sign of growing confidence in Italy. In addition, market liquidity has remained stable, with low volatility, although there have been some increases in conjunction with the global turbulence over the summer. On the real estate, house prices continue to rise, but have not yet reached pre-pandemic levels, while commercial real estate they have stabilized.

Le Italian families are experiencing an improvement in their economic situation, with income growth and an increase in financial wealth. This has contributed to greater confidence in investments, with a continued preference for government bonds and a return to investments in managed savings instruments and shares. After a long period of growth, interrupted only by the pandemic, the profitability of companies has shown signs of weakening, due to macroeconomic weakness and the high cost of financing, but repayment capacity remains solid and the rate of deterioration of bank loans remains low.

The Italian banking system: solid, but vigilant about risks

The conditions of the banking system continue to be favorable, even if there is a slight slowdown compared to the peaks reached in 2023 and 2024. The profitability è grown in the first half of the year and is expected to remain high until the end of the year. The Eurosystem is proceeding smoothly with its reabsorption of excess liquidity, although, in the long term, lower interest margins and higher loan write-downs could reduce profitability. Overall, the Italian banking system is well capitalized compared to the European average, which is a strong point, but attention remains high on Cyber ​​and operational risks, which require continuous monitoring.

Insurance sector: good prospects, but with some difficulties

Il Italian insurance sector is in a stable situation, with a capitalization which, albeit slightly decreased in the first half of the year, remains solid. Overall profitability has improved, although the life sector continues to suffer from investment losses. The liquidity position of insurance companies is good, also thanks to the recovery in collections in the life sector. The sector of Mutual funds has seen a positive turnaround, with the harvesting net which has returned to being positive, supported by the good performance of the bond funds.

Risks and opportunities in the certificate market

One aspect that deserves attention is the growing spread of CERTIFICATES, complex and difficult to evaluate instruments, but which are gaining popularity among Italian families. These instruments can expose savers to significant risks, especially in the event of unfavorable economic scenarios. Bankitalia has already reported the increase in these instruments for some time and – as explained in the report – is carefully monitoring the situation.

Three thematic focuses of the Bankitalia report

The Report also contains three thematic focuses, which examine some specific aspects of the financial system. The first presents the latest assessments on the Bank riskiness less significant, which have not shown significant changes. The second box analyses the relationship between the propensity to use digital channels from customers and the stability of bank deposits, noting that during the period of rate increases there are no significant differences in the behavior of sight deposits between banks with digitally inclined customers and others. The third box provides the results of the analyses of the mutual fund stress tests, identifying areas for improvement even in the presence of practices that comply with the regulations.