Italian banks' lending to firms stagnates in December

MILAN (Reuters) -Italian banks' lending to businesses came to a standstill in December, in the weakest performance for three years, Bank of Italy data showed on Thursday.

A monthly report on the balance sheets of domestic banks showed loans to non-financial companies were flat year-on-year in December compared with a 2.7% expansion the previous month.

It was the first month to show no growth since February 2020, when corporate lending fell 1.2% annually as the COVID-19 pandemic broke out in Italy.

The central bank did not provide any details on the reasons behind the flat corporate loans.

Extraordinary government support measures during the pandemic and the energy crisis fuelled strong growth in corporate bank lending, but the trend has weakened as support measures have been gradually unwound.

Italy's biggest bank Intesa Sanpaolo sharply cut its stock of existing loans at the end of last year, a drop which likely contributed to a reduction in the overall stock of banks' corporate loans.

Banks can cut their stock of loans by selling them to investors or paying investors to take on the risk they carry.

Banks' corporate loans totalled 649.2 billion euros at the end of December, down from 666.3 billion euros a month earlier.

Intesa shed 29 billion euros ($31 billion) in risk weighted assets to boost its capital reserves ahead of planned regulatory changes to its risk models that are set to eat into its buffers.

Thursday's data also showed Italian residents' deposits with domestic banks fell to 2.71 trillion euros ($2.92 trillion) compared with 2.74 trillion euros the previous month.

Gross unpaid loans declined to 30.15 billion euros at the end of December from 34.01 billion euros a month earlier.($1 = 0.9293 euros).

($1 = 0.9283 euros)

(Reporting by Alessia Pé and Valentina Za, editing by Alvise Armellini and Gavin Jones)