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Could Italy Be Better Off than its Peers?

As Greece gets its first instalment of aid from the European Union Tuesday, investors and traders are concerned about the fiscal strength of the other PIIGS: Portugal, Italy, Ireland and Spain.

Even though Italy has a large debt-to-gross domestic product (GDP) ratio and budget deficit, it is capable of managing large amounts of debt over long periods of time, according to Alessandro Roccati, vice president of Italian banks at Macquarie Securities.

Italy's long maturities and high domestic ownership of the country's bonds make it different from the other PIIGS nations, Roccati told CNBC Tuesday.

"The biggest chunk of Italian public debt is owned by the Italians. So that is the major difference between Italy and Greece, for instance," he said.

With the bulk of Italy's debt being owned by the public, there is very limited exposure of Italian government bonds to foreign investors, Roccati told CNBC.

Roccati said he sees Italy's public deficit taking up 4 percent of the country's GDP in 2010, much lower than the estimated 7-8 percent for Portugal and Spain, and 12 percent for Greece.

As a share of GDP, Italy's state borrowing, at more than 116 percent, is the second highest in Europe after Greece, according to Roccati.

"If you look at the outlook for Italy, it is brighter than the other countries'," he said.

The recent devaluation of euro will benefit Italian economy, according to Roccati. As a result, the worst is over for Italian banks and there is good value there, he said.

- Watch the full interview with Alessandro Roccati above.

Good Value in Italian Banks

"One of the major concerns for the Italian banks was the compression of the net interest income which is driven by a decrease of the spread and very poor volumes," Roccati said. "Now with the depreciation of the euro versus the dollar, which is in the region of 15 percent, we see a potential increase of exports. Italy is an export-driven country. And then an increase of lending volumes for the banks."

The European Debt Crisis - See Complete Coverage
The European Debt Crisis - See Complete Coverage

"We are cautious at least for another few weeks. But fundamentally, we see potential upside for Italian banks," he said. "We are still cautious on Spanish banks and we are still cautious on Greek banks."

Roccati's top Italian bank stock pick is UniCredit.

"We have an 'outperform' rating on UniCredit," he said. "We think fundamentally the Italian banks are out of the woods. We've seen in the first quarter an improvement of the cost of credit. We've seen a flat net interest income. And we've seen costs well under control."

Roccati also has an "outperform" rating on Intesa San Paolo.

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