Although Italian NPL pools are considered to have uneven cash flows, Fitch Ratings still views the sector as stable and said that the asset class has been performing better than expectations. The rating agency just came out with its fourth edition of the yearly report called Italian NPLs: Market Update and Performance Comparison - 2006. Since the last market update in June 2005, the rating agency reviewed 12 deals, all of which have been affirmed or upgraded.
"For this edition, we highlighted the point that the recoveries on the unsecured nonperforming loans have exceeded our expectations, the main reason being that these unsecured positions are actually not completely unsecured," said Alessandro Gustapane, co-author of the report with Andy Brewer, in a telephone interview. "There is some collateral backing these loans so banks are able to get some recoveries out of the collateral." The report also highlighted the servicer's ability to recover losses from the borrower. "The servicer is playing a more and more important role in NPLs," Gustapane said.