Italy

Italy's banking system is led by two national champions, Intesa Sanpaolo and UniCredit, each with more than US$1tn of assets, followed by a tier of mid-sized groups that is being reshaped by mergers. The five largest credit institutions held 51.2% of sector assets in 2025, according to ECB structural indicators, and 415 credit institutions were registered in August 2026. Monte dei Paschi di Siena consolidated Mediobanca from 30 September 2025, lifting its total assets to €241.6bn and placing it alongside Banco BPM and BPER Banca.

Profitability is at multi-year highs. Banca d'Italia puts the system's 2025 return on equity at 13.8%. Intesa Sanpaolo reported 2025 net income of €9.3bn, up 7.6%, and UniCredit €10.6bn, up 14%, with a 19.2% RoTE. UniCredit is targeting about €11bn of net profit for 2026 and above 23% RoTE by 2028. Capital returns are correspondingly large: UniCredit's 2025 distributions totalled €9.5bn, and Intesa Sanpaolo proposed a total dividend of 37.6 euro cents per share for 2025.

Capital and asset quality are strong by historical standards. The system CET1 ratio was 15.7% in December 2025, down from 16.1% in June as mergers increased goodwill deductions; for significant banks it was 15.9%, about 30bp below the SSM average. The net non-performing loan ratio fell to 1.3% at end-2025, and to 1.0% for significant groups, while the annualised default rate was 1.2% in the fourth quarter. Intesa Sanpaolo's gross NPL ratio on the EBA definition was 1.5%.

Banca d'Italia's April 2026 Financial Stability Report sees the main risks as external. After the outbreak of the Middle East conflict, government bond yields and the spread over Bunds rose, and a prolonged conflict could tighten funding and liquidity conditions and weaken borrowers' repayment capacity. Loans backed by public guarantees, 22% of performing corporate loans in December 2025, show a higher default rate of 3.6%, and the 2026 Budget Law cut the ceiling for new SME guarantees by €20bn to €140bn.