UniCredit sells more bad loans as Italian banks accelerate clean-up

Italy's largest bank UniCredit is pictured in downtown Milan September 12, 2013. REUTERS/Stefano Rellandini

MILAN (Reuters) - Italy's biggest lender by assets, Unicredit , has sold another portfolio of non-performing loans (NPLs) as European regulators conduct a sector-wide health check with results due in October.

UniCredit, which in December announced the sale of bad loans worth 900 million euros (£735.9 million) to private equity fund Cerberus European Investments, said on Monday it had sold 700 million of NPLs to Anacap Financial Partners.

On Sunday, the Financial Times reported that domestic rival Intesa Sanpaolo was working on plans to set up an internal bad bank to house a chunk of its 55.5 billion euros of gross non performing loans.

Intesa declined to comment on Monday but analysts said the bank would be sensible to clearly separate bad assets from good ones in the run-up to a so-called asset quality review by the European Central Bank (ECB).

"We see this as an additional move by Italian banks to keep improving their balance sheets ahead of the asset quality review," Morgan Stanley said in a note.

Italian lenders have had to set aside billions of euros to cover loan loss charges, with the Bank of Italy forcing them to hike provisions since late 2012.

Bankers say the disposal of bad loan portfolios is set to accelerate, and some analysts advocate setting up a system-wide bad bank like the ones created in Ireland and Spain at the height of the euro zone debt crisis.

Both Intesa and UniCredit have a strong core capital and neither is expected to need to raise funds in the wake of the ECB assessment this autumn.

However, small and medium-sized Italian lenders are on a weaker footing, and four of the 15 Italian banks to be scrutinised by the ECB are expected to tap the market for around 6 billion euros between April and July.

They are Monte dei Paschi di Siena , which must raise 3 billion euros to pay back state aid, Banco Popolare , Banca Popolare di Milano and Banca Carige .

(Reporting by Francesca Landini and Silvia Aloisi; Editing by Louise Ireland)

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