Italian banks becoming part of the solution?

For a long time Italian banks have been the scare of the Eurozone. In particular, their mountain of NPLs, usually not properly covered by adequate reserves, have been a Damocles sword on top of European technocrats. However, the recent swift, bail-out of the venetian banks and MPS has suddenly taken a weight off the sector. Italian bank shares are up over 25% year to date, and problem cases are now much more manageable. Of course, there is still the problem that on top of the mountain of NPLs there is an even taller pile of UTPs (acronym for unlikely to pay…), which are essentially NPLs in gestation. If the economy picks up steam, and the banks continue to work through their NPLs, it is still possible that the UTPs will not become the next ticking bomb for the Eurozone. The markets have turned bullish, we shall see…