Italian banks have a $350B problem: Top hedge fund manager

Italian banks must tackle a 300 billion euro ($341 billion) load of non-performing loans, the co-founder of a hedge fund with a base in Milan told CNBC on Tuesday.


"That problem isn't going away ... I think it will be a very rocky 2016 for some of the banks," Joseph Oughourlian, co–founder of Amber Capital, told CNBC TV at the Investors Choice Awards in London.

Shares in Italian banks tumbled earlier this year when the European Central Bank requested further information on their portfolios of bad debts.

"The issues with Italian banks keeps us up at night," Oughourlian told CNBC.

In light of concerns, Italy has established a fund to provide backup recapitalization for smaller, weaker lenders. The fund will use cash provided on a voluntary basis by the financial sector. Italy's finance minister has emphasized that no state aid is involved.

Oughourlian forecast more volatility was to come for Italian banks and said it might not be the most debt-burdened banks who were worst affected.

"It is not clear to me that the weakest banks from a NPL or capital structure (perspective) are going to be the main losers. I suspect they are going to suffer a great deal, but I think some of the well-capitalized banks might have issues as well, because they might be called on by the regulators and by the Italian government to help the weaker players," he told CNBC.

Ernesto Lienhard, CEO of investment firm BAF added that it would be "very difficult" to improve the caliber of Italian banks.

Stefano Prosperi, the CEO of Kairos Investment Management, was also pessimistic about Italy.

"Although Italy is the worst performing market in Europe we don't think now is the right time to make a macro call and go long on Italy," he told CNBC at the Investors Choice Awards on Tuesday.

'Racy' Greek banks

Rudolf Bohli, the CEO and CIO of RBR Capital, was more optimistic about investing in Greek banks.

"We like financials and if you like it a little bit racy, then I think the real big upside is in Greece," Bohli told CNBC on Tuesday.

"So we love Greek banks. We think they have an opportunity to triple in price from here. It might take a while, maybe two or three years, but it is a very decent upside," he added.

The Greek bank sector is heavily dominated by four names — Alpha Bank, Eurobank Ergasias, National Bank of Greece and Piraeus Bank.

"Piraeus is probably the one with the biggest upside; Alpha banks is typically seen as the one that is best managed — so pick your poison," Bohli told CNBC.

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