The Growing Influence of Specialty Banks in Italy

The impact of specialty finance is growing in the Italian economy. These are financial intermediaries specialized in lending to usually medium-small companies going through financial strain. This strain might manifest as delays in repayment schedules (if the delay is less than 90 days, the loan falls under the Stage 2 category, technically still in good standing) or businesses that, despite being fundamentally sound, face challenges accessing mainstream credit channels.

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Overview of the Growth in Specialty Finance

According to a recent study by PWC titled “The Italian specialty finance market for SMEs,” the volume of new loans issued by these institutions, known for their high level of digitization and faster fund disbursement compared to traditional channels, has doubled between 2018 and 2021, from €6 billion to €12 billion. During the same period, traditional banks saw a less than 20% increase in annual flow, from €222 billion in 2018 to €264 billion in 2021.

Specific Specialty Finance Institutions and Their Impact

Though the magnitudes are starkly different, it’s noteworthy that most specialty finance institutions are relatively new, some even having been established from pre-existing institutions acquired for the sole purpose of using their banking license. For example, Banca Progetto, originally known as Banca Lecchese, was acquired in 2015 by the British fund Oaktree from Banca Etruria, one of the four Central Italian banks. The others are Banca delle Marche, Cassa di Risparmio di Chieti, and Cassa di Risparmio di Ferrara. All faced challenges in those years due to the real estate market crisis.

Still, the market share of specialty finance institutions increased from 3% to 4% during this period, and given their growth trajectory, it likely saw further increases in 2022. Notably, due to their swiftness, which was crucial during the pandemic-induced emergency, their market share in credit backed by MCC and Sace guarantees grew from 2% to 6% from 2020 to 2022. This growth was bolstered by the strong role SMEs play, which, as highlighted by PWC’s research, constituted about 70% of the credits with public guarantees by the end of the first quarter in 2023.

Banca Progetto’s Prominent Role in Specialty Finance

In the context of specialty finance, Banca Progetto stood out, increasing its market share from 1% to 4%. Reflecting this, the bank, led by former Unicredit executive Paolo Fiorentino, closed 2022 with total assets of €6.7 billion (up 45% from €4.6 billion in 2021) and business loans worth €2.7 billion (up from €2.2 billion in 2021). By the end of March 2023, their total assets were €7.1 billion, with business loans amounting to €700 million. This growth was further driven by various securitization operations.

Banca CF+, a specialty finance spin-off from Credito Fondiario, might also see significant growth after acquiring operations of Credimi, an open bank initially established as an invoice trader. This acquisition solidified CF+’s long-sought low-cost funding source.

Details on the Rise of Factoring and Noteworthy Institutions

Interestingly, PWC’s analysis indicates a significant portion of loans guaranteed by MCC was used to refinance prior company debts, highlighting the liquidity needs of Italian SMEs.

This trend is further confirmed by the steady rise of factoring, with SMEs representing 80% of the client number and 20% of the turnover, which hit a record €287 billion in 2022, according to Assifact data. In this scenario, specialty finance institutions like Illimity, Clessidra Factoring, Generalfinance, and Banca Ifis have recorded substantial growth.

To provide specifics on the specialty finance market:

• By mid-2023, Illimity reported a turnover of €3.3 billion through its Growth Credit division, a 32% increase from the previous quarter.
• Clessidra Factoring increased its turnover by 47% in the first half of 2023 compared to 2022, reaching €286 million and a 56% increase in credit volume.
• Generalfinance, listed on the Star segment of Piazza Affari and specializing in providing liquidity to financially strained companies, reported a 22% growth in turnover, reaching €1.1 billion in the first half of the year.
• Banca Ifis, by far the largest player in the group, increased its turnover by 11%. As of the end of 2022, under CEO Frederik Geertman, they’re among the top ten in the Italian market, with a turnover of €13.7 billion.

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(Featured image by Croberin Photography via Pexels)

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First published in Be Beez. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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