Lengthy payment delays across the Italian economy have turned some of the country's banks into global factoring powerhouses willing to finance companies' receivables.
Intesa Sanpaolo SpA's (>> Intesa Sanpaolo SpA) Mediofactoring division is the biggest business in its sector in Europe, and the fourth largest in the world with a 2.5% share of the global market, according to 2011 rankings published Thursday by Factors Chain International, a trade body.
Chinese giants such as Industrial & Commercial Bank of China Ltd. (1398.HK) and Bank of China Ltd. (3988.HK) are the world leaders, with a combined 7.8% market share.
Unicredit SpA's (>> UniCredit SpA) factoring unit is in the top league with a 1.2% market share, while Ifitalia, a longtime division of Banca Nazionale del Lavoro SpA, which is now owned by BNP Paribas SA (>> BNP PARIBAS), has a 1.3% market share, according to the ranking.
Factoring is a financial transaction in which a business can sell its unpaid invoices--known in accounting jargon as receivables--to a third party at a discount.
The use of such an industry is larger where payment is slower. Italy's payment times are notoriously slow, with even the public administration behind on as much as EUR100 billion in commercial debt to suppliers. Large companies in the country are also among the slowest payers in Europe, a situation that has been exacerbated by tight credit conditions in the euro zone's third-largest economy.
Multinationals are big users of factoring in Italy, where many can't wait the 180 days it takes on average to be paid for a public-sector commission, compared with 30 in Germany. Average time of payment by local health authorities in Italy rose to 262 days last year, according to Prometeia, an economics research institute.
Under U.S. GAAP rules, companies must discount on their balance sheet any credit that hasn't been paid within 30 days. Companies may raise their prices in countries if they know they'll have to sell their invoices at a discount in order to be paid in a timely manner.
Factoring is also a useful service for all companies working across international borders, as smaller Italian firms are increasingly driven to do.
Intesa Sanpaolo's Mediofactoring has boosted its market share in Italy to 30% in 2011 from 22% in 2007. Its volume of deals grew 47% last year to EUR49.6 billion, the bank said. The division's profit rose 18.5% to EUR68 million in 2011.
It plans to open a branch in New York this year after opening branches in Spain and Germany last year, its managing director, Rony Hamaui, said.
-By Christopher Emsden, Dow Jones Newswires; +39 06 6976 6921; [email protected]