The report analyses the current condition of the Italian banking system, highlighting its overall f inancial soundness despite emerging signs of credit quality deterioration, particularly in the corporate loan segment. Key areas examined include profitability, capital adequacy, liquidity risk, market risk, interest rate risk, exposure to real estate and climate-related risks. The report also provides an overview of TLTRO operations and the ongoing decline in publicly guaranteed loans. On the operational side, increasing risks associated with digitalisation and cyberattacks are noted. Overall, the Italian banking sector demonstrates strong resilience, though it faces a challenging and uncertain macroeconomic environment that could adversely impact profitability and credit quality in the coming years.