(Bloomberg) -- Italy's banking system is in a better position than in the past to face fallout from Russia's invasion of Ukraine, the Bank of Italy said in its annual report on financial stability.
“Loan deterioration, though slightly on the rise compared to the last quarter of 2021, remains at historically contained levels,” the central bank said. Profitability has improved and capitalization which had grown in 2020 “decreased only slightly last year.”
Even so, overall risks to financial stability are on the rise, the bank said. The gradual phasing out of government pandemic support measures and the fallout from Russia's invasion of Ukraine are a significant source of uncertainty.
According to the report, risks include both the direct exposure of some banks to Russia and Ukraine, and indirect risks from clients that are hit by the economic and political impact of the war.
Italian banks' exposure to Russia, Belarus and Ukraine is equal to 0.7% of total financial activities, almost all of it concentrated in the country's top two banking groups, Intesa Sanpaolo SpA and UniCredit SpA, according to slides presented with the report.
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