Europe's biggest debt collector says Italian exposure 'very good'

Stockholm

EUROPE'S biggest debt collector, Intrum AB, says it doesn't see the political turmoil in Italy hurting its business.

Louise Bergstrom, head of investor relations at the Stockholm-based company, said: "The way things look today, and given what we have on our books, we think that is very good debt."

Intrum, which operates in 24 countries, offers credit-management services and buys debt portfolios from corporate clients and banks.

Moody's Investors Service cut the outlook on Intrum's credit rating last month from positive to stable, citing its partnership with Intesa Sanpaolo to service non-performing loans in Italy.

That deal was announced in mid-April. Yields on Intrum's bonds rose earlier this week as concern grew that political turmoil in Italy might be the beginning of a new euro zone debt crisis.

Yields have since retreated a bit, after the company said its Italy exposure wasn't suffering.

Intrum's share price has also recovered since the company's announcement that the current activity in Italy so far hadn't been hit by the political uncertainty, Nordea Bank said in a client note on Thursday.

Nordea is advising investors to buy Intrum stock, and sees the shares trading at 305 kronor (S$29.70 ) in 12 months, up some 45 per cent from the current price.

Ms Bergstrom said: "Political instability isn't anything new, and it's something we've considered when we look at the price and what we paid.

"We're still very happy with the transaction and believe strongly in it," she said, referring to the Intesa deal.

Hoist Finance, another Swedish debt collector, says the panic hitting Italian markets is unlikely to last.

Michel Fischier, head of investor relations there, said: "Our assessment is that the likelihood of a dramatic deterioration over the long term in the Italian market is low, even if it's very turbulent right now.

"What everyone seems to forget when they look at the situation in Italy is that if the proposals that are now being discussed by the Five Star Movement and the League would become reality, it would first and foremost punish the already-weak Italian banks and also the entire Italian economy, and make normal lending impossible in the country.

"I am completely convinced that the latter is not in the interest of any Italian political party."

Hoist doesn't have any local financing in Italy, so "we are therefore not affected by the current volatility when it comes to Italian market rates", said Mr Fischier.

Ms Bergstrom at Intrum said that with Italy's non-performing loan market representing one of the biggest of its kind in Europe, it's important to be exposed to the country if "you want to be one of the leading players in Europe".

Mr Fischier said: "At Hoist, the view is that we've been here before. It's not really anything new that's happening in the Italian market.

"Italy is a country that has had roughly as many governments as the number of years that have passed since World War II, so turbulence at the government level is what's normal in Italy.

"We have successfully operated in Italy since 2011 during a lot of different government constellations." BLOOMBERG