NPL&REO News

ECB funding help Greek banks to face profit’s challenges

Greek banks will be able to face challenges to profitability from the coronavirus crisis with the help of increased funding from the European Central Bank (ECB), said the credit rating agency Moody’s.

According to its latest credit outlook report, Moody’s expects Greek banks’ profitability to weaken as coronavirus-related market disruption shrinks quality lending opportunities and erodes fee and commission income, mainly due to fewer disbursements of new loans.

The ECB’s move in April to accept Greek government bonds as eligible loan collateral, despite their ‘B1-stable’ non-investment-grade rating, led to a steep rise in Greek banks’ ECB borrowing, Moody’s said.

Greek banks increased their ECB funding to €21.5 bn in April, around 8% of Greece’s total banking assets, from €12.4 bn in March and €8.1 bn in December 2019.

The banks borrowed through the ECB’s longer-term refinancing operations mechanism (LTRO), offered to euro zone commercial banks at -0.5%.

“We believe that Greek banks’ increased ECB funding was concurrent with their reduced interbank repo funding, which was around €13.5 bn at year-end 2019,” Moody’s said, noting that repo costs had risen due to the coronavirus pandemic.

The -0.5% cost of funding via the ECB’s LTRO, along with increased private-sector deposit balances of around €145 bn as of March at a cost not higher than 0.14%, will support banks’ net interest margins and profitability, Moody’s said.

Moody’s expects net interest income and margins at the country’s large banks – Piraeus, National, Eurobank and Alpha – to remain under pressure from falling loan balances and very low interest rates.

“However, we expect limited deterioration since banks will continue to accrue interest despite government relief measures that suspend borrowers’ repayment of loan capital for six months,” Moody’s said.

Original Story: Reuters | George Georgiopoulos 
Photo: Photo by Jonte Remos from FreeImages.com
Edition: Prime Yield

Number of mortgages dropped 14.6% in March

The number of mortgages taken out by Spaniards fell in March by 14.6% year-on-year, the government’s statistics body said, reflecting the hit from the coronavirus outbreak.

March’s 26,382 mortgages also represented a 26.8% decrease from February, the National Statistics Institute said.

One of the worst-hit nations in the world by the COVID-19 disease, Spain began a strict lockdown on March 14.

Mortgages in April, the first full month under lockdown, are likely to fall even more starkly. Analysts expect the near standstill in Spain’s economy to have a direct impact on banks’ mortgage books, which account for 40% of their credit portfolios or around €500 bn.

State-owned Bankia, one of the most-exposed lenders to mortgage loans, said during first quarter results new mortgage lending had fallen around 60% in April against March, though it expected a post-lockdown recovery.

Lockdown measures prevented individuals from conducting property visits, taking out mortgages, and relying on public notaries – who were only permitted to practise in emergency cases.

To mitigate the impact of the epidemic, which led to hundreds of thousands of job losses, the government approved mortgage holidays in March.

Spain’s economy relies heavily on both tourism and real estate activity, making it particularly vulnerable to the pandemic which has killed 27,117 people.

Property prices, however, held steady despite the economic ravages, with Spain’s largest property portal Idealista reporting a 0.5% rise in home prices in April.

Original Story: Reuters| Clara-Laeila Laudette
Photo: Photo by Svilen Milev from FreeImages.com
Edition: Prime Yield

10% of households with credit are in default

For the fourth month in a row there is an increase in the percentage of households in credit default situation, according to the latest data released by Portugal’s Central bank (BdP). And, in April about 10% of households with loans were unable to pay their instalments, the highest percentage since May 2018.

Overdue loans in consumer credit rose for the third consecutive month, to 6.8% from 6.7% in March. As for the mortgage loans, the default ratio stabilized at 4.4%.

The total amount of default credit by households fell in April to €2,429.8 mn, from the €2,445.7 mn in the previous month. 

The percentage of default is also increasing for nonperforming corporate credit. Withing the hospitality and F&B sector, 25% of the borrowers were in default in April, comparing with the 21,8% in March and the 21,3% recorded one year before. This increase corresponds to the forced lockout period due to the State of National Emergency established in March 18th and that last until May 2nd.. During that time, several companies closed – some of which permanently – and the unemployment rose, as well as the layoff. 

Before the pandemic crisis, the credit granted to households hit new records. During the first trimester of 2020, the credit applications rose to €4.9 billion. This increase was even felt in the consumer credit, which Portugal Central Bank has been struggling to brake with the reinforcement of limits for its concession.

Original Story: Dinheiro Vivo | Elizabete Tavares 
Photo: Photo by Hugo Humberto Plácido da Silva from FreeImages.com
Translation & Edition: Prime Yield

NPG and Alpha bank up provisions to cover coronavirus loan impact

National Bank (NBG) and Alpha, two of Greece’s largest lenders, increased provisions to cover anticipated loan impairments from the coronavirus crisis as they kicked off the first quarter earnings season for the sector on Thursday.

The coronavirus pandemic struck just as Greece’s banks were making headway in their bid to sell, write off or restructure billions of euros of bad debt accumulated during the last financial crisis.

The country’s economy is seen contracting by 6% this year, under the central bank’s baseline scenario, hit by restrictive measures to slow the spread of the virus, the global recession and an expected sharp drop in tourism.

The stock of non-performing loans (NPLs) declined by 16% last year but remained at a high 40% of gross loans, hampering banks’ ability to lend and finance economic recovery.

National Bank NBG, 40% owned by the country’s HFSF bank rescue fund, posted net profit from continued operations of €409 million in the first quarter, up sharply from €18 million in the fourth quarter of 2019 and boosted by gains in Greek government bonds.

Loan impairment provisions amounted to €486 million, up from €107 million in the fourth quarter, reflecting the full absorption of anticipated COVID-19 related lending losses.

Peer Alpha Bank, 11% owned by the HFSF, fell to a net loss from continuing operations of €10.9 million versus net earnings of €5.4 million in the previous quarter, due to higher loan impairment provisions and weaker trading income.

«We expect the €24 billion of stimulus measures, at 13% of GDP, to limit the recessionary impact of COVID-19 in 2020 and pave the way for a strong recovery in 2021,» the bank’s CEO Vassilis Psaltis said.

Alpha’s NPLs inched down to 30% of its loanbook from 30.1% in the fourth quarter.

National Bank’s ratio of non-performing exposures (NPEs), which includes NPLs and other credit likely to turn bad, fell to 30.9% of its loanbook from 31.3% in December.

The economic fallout from the coronavirus pandemic will likely delay planned securitisations to shift legacy bad loans off balance sheets. In response to the crisis, Greek banks have introduced moratoria on debt payments to individuals and businesses that were performing before the outbreak. 

Original Story: Reuters | George Georgiopoulos 
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Spanish banks’ ECB borrowing rise to 16 month high in April

Spanish banks borrowed €167.5 bn in April from the European Central Bank, a 17% increase from March to the highest level in 16 months amid the coronavirus pandemic, Bank of Spain data showed on Thursday.

The €24.5 bn monthly increase was also the highest since March of 2012, near the height of the financial crisis, when it jumped by more than €146.5 bn.

In August 2012, Spanish banks had taken a record €411 bn from the ECB, when the country’s financial turmoil reached a peak and weak lenders were granted a €41.3 bn aid package from Europe that summer.

Banks in the euro zone are expected to apply for cheaper long-term funding lines to help mitigate the impact from the coronavirus outbreak.

With financial markets in meltdown and borrowing costs soaring for the euro zone’s weaker members, the European Central Bank said in April it would make loans to banks even cheaper.

With the euro zone’s economy deep in recession, banks are bracing for a new wave of non-payments from clients hit by the coronavirus pandemic and subsequent economic shutdown.

In its latest move to support the sector, the ECB said it would now pay banks at least 0.50% and up to 1% if they tap its three-year loan auctions.

Under the new ECB’s schemes, they will earn 0.50% for one year from June by simply tapping the targeted longer-term refinancing operations (TLTRO) auction and 1% if they pass on the cash to households or companies.

To prevent any liquidity crunch the ECB also announced seven new Pandemic Emergency Longer-Term Refinancing Operations (PELTRO) at which banks will get as much credit as they want and earn 25 basis points.

This may prove enticing in particular for lenders in peripheral countries such as Spain that can use the cash to buy higher-yielding domestic government bonds and pocket the difference in interest rates.

Original Story: Reuters|Jesus Aguado
Photo: Photo by Victor Iglesias from FreeImages
Edition: Prime Yield

Novo Banco’s operation in Spain up for sale

The US Fund Lone Star put the Novo Banco’s operation in Spain for sale, after the injection of €850 million by the Portuguese State into the bank, according to El Confidencial.

According to some sources close to the Spanish newspaper, the decision has even been communicated in recent days by the banks’ CEO António Ramalho to the employees of the Spanish subsidiary. And Novo Banco itself has already contacted investment banks to start the process of finding a buyer, which, if everything goes as planned, should start soon.

This decision comes after the injection of €850 million by the Portuguese State into the Novo Banco, which caused controversy among the political parties. In the market, says El Confidencial, it is still not clear whether this is a sale in block or some business.

The results of the Spanish subsidiary are not known, but sources said to the Spanish newspaper that it has hardly generated profits in recent years. The lack of a determined investment in Lisbon has led to a decrease in business over the last five years, with income from interest and commissions falling from €150 mn to €55 mn in 2019.

Original Story: Eco News | News 
Photo: Novo Banco Site
Edition: Prime Yield

Greek banks compete for participation in the state-backed Guarantee Fund

There is strong competition among banks for participation in the Guarantee Fund for the provision of state-subsidized liquidity to Greek enterprises, with 14 lenders expressing an interest in response to the invitation published by the Hellenic Development Bank.

These banks are the four systemic ones (Alpha, National, Eurobank and Piraeus), Attica, Optima, Procredit, six cooperative lenders (Epirus, Pancretan, Thessalia, Karditsa, Central Macedonia and Hania), as well as British credit corporation Ebury.

Such is the competition for the state-backed credit that the amount of loans for which banks have submitted offers added up to €8.5 bn, while the sum of the credit with the contribution of banks has been calculated at €7 bn. Sources say the four systemic lenders have submitted demands for loans totaling over €1.5 bn each, thereby laying claim to over €6 bn between them from the liquidity to be channeled to the economy with a strict timetable up to the end of the year.

According to the announcement by the Hellenic Development Bank, the amount of €7 bn to be handed out in the form of working capital to all companies regardless of whether they have been hurt by the pandemic will be distributed among banks based on each lender’s share in the financing of small, medium-sized and large corporations.

The increased competition among lenders is also indicative of the high interest among the enterprises themselves, which anticipate the activation of the fund to bring some cash into the economy and go some way toward tackling the general recession caused by the pandemic.

The Hellenic Development Bank has already announced that is examining the applications submitted for the determination and signing of contract terms with the commercial banks. The contracts will determine the conditions of the state guarantee to maximize the benefit and minimize the cost of funding for the corporations to get loans from the banks. All companies operating in Greece are eligible for the loans providing they were not deemed problematic before January 1, 2020, are considered solvent and serviced their debts up to end-December.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Site Alpha Bank
Edition: Prime Yield

Spanish companies are now better prepared to cope with the crisis

Spanish companies are better prepared to face the disruption from the coronavirus pandemic than when the global financial crisis hit, although some vulnerabilities persist, the Bank of Spain governor said.

Spain’s central bank said in its latest financial stability report that risks to global financial stability had increased but measures taken at national and European should help mitigate them.

«Spanish households and non-financial companies are facing this situation with a significantly more favourable financial position than before the global financial crisis,» Bank of Spain governor Pablo Hernandez de Cos said in a separate statement commenting on the central bank’s report.

De Cos, who is also a member of the European Central Bank governing council, said the better relative positive position of Spanish companies was mainly a result of the substantial reduction of their debt in recent years, which is now below the European average.

However, the Bank of Spain said the contraction of the economy in the second quarter would be significantly higher than in the previous quarter, when it showed a quarterly record decrease of 5.2%.

The Bank of Spain also said that the COVID-19 pandemic had lead to an increase of the cost of risk – or the cost of insuring a loan – in banks’ exposures to companies. The challenges for lenders were significant due to the magnitude of the shock in the short-term.

Against this backdrop, the Bank of Spain said that despite the significant reduction in bad loans since 2014, the non-performing loans ratio was still above pre-crisis levels and would experience an increase thus further eroding the bank’s already battered profitability ratios.

Original Story: Reuters| Jesus Aguado, Emma Pinedo
Photo: Photo by Pablo Rodríguez from FreeImages
Edition: Prime Yield

Portuguese banks forced to make €200 million in provisions due to pandemic

Four of Portugal’s largest banks saw their profits halved in the first quarter of 2020 because of the provisions needed to deal with the pandemic crisis.

Caixa Geral de Depósitos (CGD), BCP, Santander and BPI have recorded generic provisions of €200.8 million to face the economic crisis caused by the pandemic, according to Jornal de Negócios. BCP was the bank that put most money aside: €78.8 mn, followed by CGD with €60 mn, while Santander and BPI set aside €30 mn, in what is a cautionary exercise from the banks before what they expect to be an increase in the number of defaults. 

Nevertheless, the effect of provisions on the results of the first quarter of Caixa Geral de Depósitos (CGD), BCP, Santander and BPI has already been felt with intensity: profits have fallen by half in relation to the same period of last year, from €466 mn euros to €246 mn.

Original Story: Eco | News 
Photo: Photo by Alfonso Romero for FreeImages.com
Edition: Prime Yield

Eurobank gets the green light for Greek guarantees on securitization

Eurobank has become the first Greek lender to make use of the government’s Hercules scheme to reduce nonperforming loans after gaining finance ministry approval for state guarantees on senior tranches of its Cairo I and II debt securitisations.

Greek banks have been working to reduce €75 bn of bad loans that resulted from the last financial crisis, which shrank the country’s economy by a quarter.

The Cairo programme consists of three securitisations that together amount to €7.5 bn and will help Eurobank to reduce its ratio of so-called non-performing exposures (NPEs) to 15% in the first quarter.

Shedding the bad debt is crucial for Greek banks’ ability to lend and shore up profits. The Hercules scheme (HAPS) was put in place to help the banks to offload up to €30 bn in bad loans.

The Greek state’s guarantee on the senior notes amounts to about €2.4 bn. 

Original Story: Ekathimerini | News/ Reuters 
Photo: Eurobank website
Edition: Prime Yield

BBVA’s Q1 net profit falls 75% on coronavirus provisions

BBVA announced its first-quarter net profit fell 75.3% from the same period a year ago after setting aside €1.43 bn in provisions to anticipate the coronavirus pandemic impact, prompting the lender to suspend dividend payments for 2020.

BBVA was the only major Spanish bank that had so far not modified or cancelled its shareholder remuneration policy.

The country’s second-largest bank by total assets reported a net profit of 292 million euros in the January to March period.

Original Story: Reuters| Jesus Aguado, Emma Pinedo
Photo: BBVA
Edition: Prime Yield

Millennium bcp Q1 net profits declines by 77%

Portuguese bank Millennium bcp reported a 77% decline in first-quarter net profit to €35.3 mn following its provisions to offset the economic impact of the novel coronavirus.

The outbreak is set to dent Portugal’s economy, with the International Monetary Fund expecting gross domestic product to contract by 8% this year, above the European Commission’s predictions of a 6.8% drop.

“Predictions (…) all show we are in a serious recession,” the bank’s chief executive Miguel Maya said. “We are at a time of many uncertainties; we are working with a lot of market volatility and pragmatism is required to ensure we are able to adapt our strategy.”

The provisions implemented by Portugal’s largest listed bank to cope with the impact of the coronavirus cost nearly €79 mn, it said in a statement without detailing the provisions.

Although the outbreak affected the bank’s net profit, its net interest income rose 6.3% to around €385 mn during the first three months of 2020, it said.

Millennium also operates in Poland, Angola and Mozambique.

Original Story: Reuters | Sérgio Gonçalves 
Photo: Millennium bcp site
Edition: Prime Yield

European banks expected to suffer a €380 bn hit due to pandemic

European banks are expected to duffer a hit of up €380 billion to their capital due to the economic disruption from coronavirus pandemic, but most should be able to absorb the losses, according to the European Banking Authority (EBA).

EU’s banking watchdog said it had carried out a “sensitivity analysis” based on the results of its 2018 stress test of the sector to determine the likely increase in nonperforming loans (NPL) and increased riskiness of their loan books because of the virus emergency. 

The share prices of many European banks have fallen almost 50% this year as investors have anticipated how the economic and financial turmoil caused by the pandemic will hurt their weak profitability and may force some to raise extra capital. 

However, “The starting position of the banks [was] very good at the end of last year [and] the measures put in place since the last crisis have held up”, José Manuel Campa, chairman of the EBA, told the Financial Times.

“As a result of all that, the buffers are large and should be sufficient in the short term so we are not worried about [the banks’] short-term ability to lend to the economy and in the long term to have sufficient buffers to absorb the eventual losses,” he added. 

Assuming an increase of between €169 bn and €291 bn in bad loans at the biggest eurozone banks, the EBA said the hit to their capital would be accentuated by an overall increase in the likelihood of borrowers to default. 

The watchdog’s estimate for the capital likely to be wiped out by the crisis ranged from 2.3 to 3.8 % of banks’ total risk-weighted assets — the main way they measure how much capital they need. Every percentage point of risk-weighted assets is worth about €100bn of capital. 

At the end of 2019, banks had capital equivalent to nearly 15 per cent of their risk-weighted assets — roughly 3% above the level required by regulators. Several measures introduced by regulators in response to the virus have provided banks with capital relief equivalent to about 2% of risk-weighted assets. 

The FT reported this year that European Central Bank officials have held high-level talks with counterparts in Brussels about creating a eurozone bad bank to remove billions of euros in toxic debts from lenders’ balance sheets — but the plan has faced opposition from some EU governments. 

The EBA, which postponed a planned stress test of the sector until 2021 because of the virus, said: “As the crisis develops, banks are likely to face growing non-performing loan volumes, which can reach levels similar to those recorded in the aftermath of the sovereign debt crisis. 

“Capital levels should help banks withstand the impact of Covid-19,” it said, adding: “There could be weaker banks (those with pre-crisis problems or heavily exposed to the sectors more affected by crisis) facing more severe challenges.” 

Total NPLs in the biggest 121 eurozone banks had more than halved in six years to €506bn, or 3.2% of their loan books, by the end of last year. But Greek, Cypriot, Portuguese and Italian banks still have NPL ratios above 6%. 

The watchdog said that 18 per cent of European bank loans were to companies in sectors expected to be hardest hit by the disease, including hotels, restaurants, manufacturing, electricity and transport and storage.

However, it said there were a number of caveats to its estimates, including the government guarantees and moratoria being offered on bank loans in various countries, which could shield lenders’ balance sheets from the impact of the crisis. 

It warned that its analysis was only for credit risk, and there could be “additional losses from market, counterparty and operational risk”. It added it had not taken account of the rise in bank lending since the start of this year, as many companies drew down credit facilities.

Original Story: Financial Times | Martin Arnold and Stephen Morris 
Photo: Photo by Szymon Szymon for FreeImages.com
Edition: Prime Yield

Greece and Italy follow divergent paths on NPL securitization, after pandemic

Before the coronavirus pandemic hit, banks in Italy and Greece had been pinning their hopes on securitization to help them run off billions of euros of toxic debt incurred in the last credit cycle. But the two countries could now follow divergent paths when dealing with bad loans, according to Standard & Poor’s Market Intelligence anaylists’.

Securitization — whereby loans are pooled together and sold on to investors as securities — looks set to remain a viable exit for Italian banks attempting a balance sheet cleanup once the initial shock of the outbreak subsides, analysts say. But for Greece the picture is more complicated.

Both countries came into the current crisis with some of the highest levels of bad debts in Europe, at €110 billion and €70 billion, respectively, as of the end of 2019. Not only do their banks still need to deal with this, but they could also face new inflows of bad loans as struggling borrowers default on repayments during the pandemic.

It is therefore in the interest of all parties, regulators included, that banks have a range of options on the table for unloading bad debts, including securitization, Alessio Pignataro, head of European nonperforming loans at DBRS Morningstar, told S&P Global Market Intelligence.

GACS

The Italian government has been actively encouraging banks to use securitization as a means of reducing bad debts since 2016, when it introduced Garanzia sulla Cartolarizzazione delle Sofferenze (GACS). Under this decree, banks can make use of a government-backed guarantee on the least-risky portion of securitized debt.

Some €23.7 billion of bad debt was securitized under the scheme in 2019, and €47.8 billion in 2018. Some analysts believe that Italy’s securitization wave peaked in 2018, but say that GACS, which has been extended until May 2021, remains a useful tool for banks.

“We believe that securitization will continue to play an important role for banks deleveraging,” David Bergman, managing director and head of structured finance, at Scope Ratings, said in an email, adding that a wave of new defaults could accelerate the pace of deals in 2021. Securitization activity in Italy is set to fall by about 50% to 70% in 2020 as banks pause their deleveraging plans until market conditions improve, according to an April 28 note from Scope Ratings. Italy will see around €6.6 billion of securitizations in 2020 under Scope’s baseline scenario, and €11.8 billion under an optimistic scenario. But the company expects securitization volumes to pick up again in 2021 as banks move to take advantage of GACS before it expires, and said it may depend on the speed of the recovery of the Italian economy.

Pignataro also sees a temporary slowdown in securitization deals in both Italy and Greece, where all of the systemic banks have submitted and agreed to deleveraging plans with European authorities.

Hercules

Securitization as a deleveraging strategy has a shorter history in Greece than in Italy. The Greek government introduced Project Hercules, an asset protection scheme that, like GACS, provides a state-backed guarantee on the least-risky slice of debt, in February this year. The scheme was broadly welcomed by banking analysts, although some warned that it should not be seen as a panacea for Greece’s bad debt woes.

Several banks had already launched major securitizations or were preparing them for market at the time the pandemic hit Greece, including Eurobank Ergasias Services and Holdings SA. The bank’s CEO, Fokion Karavias, reassured analysts in March that the pandemic would not derail its banner €7.5 billion securitization, Project Cairo, a multi-asset portfolio of NPLs. At that point, Eurobank had already signed a binding agreement with a buyer, Italian special servicer doValue SpA.

But it remains to be seen how the balance sheet cleanups of other lenders, such as Piraeus Bank SA, which reported in February that it planned to securitize some €7 billion of bad debt this year, will play out.

Eleni Panagiotarea, head of Greek financial think tank FinGreece and research fellow at the Hellenic Foundation for European and Foreign Policy, believes that the pandemic could pose some material challenges to Greece’s securitization plans.

“Swift implementation, central to restoring banks’ lending capacity at a critical time, is disrupted, and a number of hurdles appear down the road: how the state guarantee will operate considering post-coronavirus conditions, the competition that Greek banks will now face in the European securitization market, and of course, how the value of collateral accompanying the loans to be securitized will be affected,” she said.

She did, however, say she understands that Eurobank has submitted a plan for a third securitization that will make use of a Hercules guarantee.

The Greek government announced in April that it would provide guarantees on up to €2 billion of emergency loans to businesses facing a liquidity crunch thanks to the pandemic.

Talk of bad banks

The Bank of Greece now has doubts that lenders will be able to deleverage quickly enough using securitization, according to local media reports. It is now looking at other options — according to local newspaper Kathimerini, it is understood to be at an advanced stage of preparing plans for a national-level bad bank, which it will submit to the European authorities by the end of May.

But this plan is likely to face stiff resistance from the European Commission, Panagiotarea said.

A broader plan to introduce a pan-European bad bank is also unlikely to come to fruition as there is little appetite for risk pooling in the eurozone at present, she said.

Original Story: Standard & Poor’s Market Intelligence | Sophia Furber and Rehan Ahmad 
Photo: Photo by Vince Varga for FreeImages.com
Edition: Prime Yield

Bankia net profit falls 54% in Q2 due to Covid-19 provisions

Bankia, Spain’s fourth-largest bank by assets, reported a 54% drop in first-quarter net profit hut by higher provisions and lower net interest income. The bank set aside a provision of €125 million to protect its balance sheet and support its customers against the fallout from the COVID-19 disease.

In the January to March quarter, Bankia reported a net profit of €94 million in the January to March quarter.

Bankia, like rival Santander SAN.MC and others, has been taking steps to counter risk as the global economy reels due to the coronavirus crisis.

Like many other European banks, Spanish lenders are also struggling to increase earnings on lending due to low interest rates.

Bankia’s net interest income, or earnings on loans minus deposit costs, fell 8.7% to €458 million. Analysts had forecast it at €473 million.

At the end of March, Bankia had a core tier-1 capital ratio – the strictest measure of solvency – of 12.95% versus 13.02% at end-December, while its non-performing loan ratio stood at 4.9%, down from 5%.

Original Story: Nasdaq|Jesus Aguado
Photo: Bankia Site
Edition:Prime Yield

Bain Capital Credit Agrees to Acquire NPL Portfolio in Greece

Bain Capital Credit, LP announced at June 5th that it has entered into an agreement with National Bank of Greece to acquire a loan portfolio, known as Project Icon. This is Bain Capital’s second portfolio acquisition in Greece since 2018.

The portfolio comprises c. 2,800 non-performing, predominantly secured, corporate contracts with total principal amount of c. €1.6 billion. The collateral securing the loans is mostly industrial, commercial and residential real estate assets.

“We are excited to expand our presence in the Greek non-performing credit market and to have assisted one of the largest Greek banks in its deleveraging,” said Alon Avner, Managing Director and Head of Bain Capital Credit’s European business. “Project Icon demonstrates our ability to complete highly complex and innovative transactions despite the challenging environment caused by Covid-19 and further demonstrates our commitment to the Greek market”

Support in executing this deal for Bain Capital Credit was provided by Hellenic Finance and Eurobank Financial Planning Services S.A.. Arbitrage Real Estate, Delfi Partners, Property Solutions Asset Management, Prime Yield and Solum Property Solutions provided real estate valuation advice, whilst Kirkland & Ellis, Zepos & Yannopoulos and Serafeim Sotiriadis & Associates provided legal assistance. Other financial due diligence and advisory was performed by Deloitte. Sioufas & Associates Law Firm provided support to the investor. 

Original Story: Bain Capital site
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Portugal to extend loan moratorium to avoid jump in NPL

Portugal will extend its six-month suspension on debt repayments beyond September for as long as it takes to avoid jeopardising the banking system with a jump in bad loans when the measure is lifted, Finance Minister Mario Centeno said.

The suspension, in place since March, can be applied for on bank loans to companies and individuals, including on household mortgages.

Originally due to expire in September, the scheme has already led to the postponement of €12 bn in interest and capital payments, the Finance Ministry estimates.

Centeno said the indefinite extension was aimed at ensuring that any surge in bad loans «can occur at a time when the trajectory of the Portuguese economy, in the global context, is more certain».

“We are ensuring that we do not put banking institutions or their customers at risk,” he said.

The chief executives of Portugal’s five largest banks, which together make up 80% of the country’s banking system, had called for such an extension during parliamentary hearings last month.

“These moratoriums are crucial … and will have to be adapted over time, and extended. That’s exactly what we’re going to do,” Centeno said.

The country is expected to suffer an 8% blow to its GDP in 2020 due to coronavirus pandemic, according to the International Monetary Fund. The European Commission estimates a 6.8% contraction.

The country’s banking sector is still scarred from a debt crisis and spike in non-performing loans (NPLs) after the 2010-13 recession, which put great pressure on capital ratios and led to the collapse of banks such as Banif in 2015.

Portuguese banks have since battled to reduce NPLs, bringing them down to a total of €17.2 bn in December 2019, from a peak of €50 bn in June 2016.

Although the NPL ratio for Portugal’s banks dropped to 6.1% of total credit in December, from 17.9% in mid-2016, it is still about twice the European average.

Portugal’s banks have lifted their average common equity Tier 1 solvency ratio to 14.1% in 2019, from 7.8% in 2011.

Centeno said the recovery strategy for the Portuguese economy would need to be aligned with and coordinated at European level.

“We will not be able to recover our economy until the European single market, to which we export 75% of what we produce, recovers,” he said

Original Story: Reuters | Sérgio Gonçalves
Photo: Photo by Lotus Head for FreeImages.com
Edition:
Prime Yield

Spanish real estate prices fell 1.1% in February year-on-year

The number of properties sold in Spain in February dropped 1.1% year-on-year and 5% compared to the previous month, according to latest figures from the National Statistics Institute (INE).

In last data to be collected before native transmissions of the coronavirus hit Spain, the residential sector fared worse month-on-month, down 6%, though year-on-year it gained 0.1%.

Spain’s property market has had a rollercoaster two decades, with a slow but steady recovery in the past eight years as it emerged from a near six-year recession provoked by the explosion of a real estate bubble in 2007.

The autonomous regions of Catalonia and Madrid, both real estate powerhouses, saw their property sales stumble 4.4% and 3.2% respectively year-on-year for February.

The two regions registering the steepest annual drop in property sales for the month were La Rioja at 36.4% and the Basque Country at 20.7%.

However, sales ballooned between 8% and 12.7% year-on-year in the Balearic Islands, Andalucia, and Aragon.

The nationwide rate of property transfers, for its part, slackened by 1.1% compared to the same month last year, representing a compound annual fall of 2.9%.

Meanwhile, Madrid and Catalonia saw property transfer rates tumble 8.2% and 6.2% respectively relative to February 2019.

Original Story: Reuters |Clara-Laeila Laudette, Belen Carreno and Jesus Aguado 
Photo: Photo by Philipp K for FreeImages.com
Edition: Prime Yield

Portuguese companies have already applied for billions from Covid-19 credit lines

Struggling Portuguese firms have already applied for billions of euros in credit lines through a government scheme to help them through the coronavirus crisis, the government said on Tuesday.

Economy Minister Pedro Siza Vieira said applications so far amounted to just over three quarters of the of the €6.2 billion worth of credit lines on offer as part of a government package to help businesses weather the impact of the virus.

A survey of nearly 9,000 companies by the National Institute of Statistics (INE) and the Bank of Portugal, published on April 21st , showed that half say they cannot operate for longer than two more months without further liquidity support.

One in 10 firms say they cannot operate for more than one month.

Siza Vieira said there were around 21,000 requests made by companies for government credit lines, which were expanded earlier this month after a state aid package worth 13 billion euros from the European Commission helped shore up the country’s finances.

The government has approved around €558 million of the €4.8 billion requested but Siza Vieira said he expected more requests to be given the green light over the next few days.

Most non-essential services have been largely shut since Portugal declared a state of emergency on March 18, since renewed until May 2, and half of companies have laid off at least some of their workers.

Official data showed the number of those registered as unemployed jumped 9% in March compared to same period last year.

But companies have already been hard hit by the lockdown, with some firms in the accommodation and restaurant sector suffering more than a 75% drop in revenue.

Some are attempting to adjust to the change in demand, with one in three firms modifying or diversifying their services since the outbreak, the INE and the Bank of Portugal survey showed.

Still, the virus outbreak looks certain to push Portugal’s once-bailed out economy into recession. The International Monetary Fund expects the country’s gross domestic product to contract by 8% this year.

Original Story: Reuters | Catarina Demony and Victoria Waldersee 
Photo: Photo by Ricardo Gurgel /FreeImages.com
Edition: Prime Yield

No bankruptcy for Greek debtors without total liquidation

Worried for their own survival during the Covid-19 pandemic, people in Greece who owe money to the state or banks and can’t pay will be eligible for bankruptcy only if everything they own is taken from them.

The New Democracy government, praised for its response to handling the crisis, has ended the Katseli’s Law that provided relief for people who couldn’t pay their bills because of almost a decade of harsh austerity measures.

Those included big pay cuts, tax hikes, slashed pensions and worker firings and has already seen many lose their homes to foreclosure after the former ruling Radical Left |SYRIZA,  with then-premier Alexis Tsipras breaking his vow of “not one home in the hands of banks,” let them seize properties.

Now New Democracy’s plan is let debtors be free of what they owe banks and the state and other creditors two years after they file for bankruptcy and 12 months after the procedure ends, but only have had all their assets liquidated after a court decision, according to the new bankruptcy code blueprint Kathimerini has seen.

The government wants the new framework to be ready in the next couple of months under a plan designed to appease Greece’s creditors, the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) and banks.

It will replace the Katseli Law, the main residence protection status and the clauses about the bankruptcy of enterprises, the paper said, pushed through quietly while people were distracted with the fear of Covid-19.

The Katseli Law designed to protect people was too lengthy, the government said, as it could take up to 15 years to complete bankruptcy procedures and banks want their hands on properties and people’s asset faster,.

That doesn’t include New Democracy and its former coalition partner the now-defunct PASOK Socialists who owe some €250 million in bad loans that aren’t being paid and with a former Conservative government giving immunity to the bank officers who approved the payouts to the parties.

Original Story: The National Herald |  TNH Staff
Photo: Photo by Lotus Head /FreeImages.com
Edition: Prime Yield

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