Portuguese Banks with potential to securitize NPL

The Portuguese banks have potential to complete more non-performing loans portfolios securitization operations, following the European trend on using these financial instruments, noted the rating agency DBRS.

According to Alessio Pignataro, Senior Vice President, European ABS – Global Strucutured Finance, Portugal, Ireland and Italy are the countries were DBRS expects the banks to use these financial instruments to reduce a still high volume of non-performing loans (NPL), besides the new entries of Spain, Greece, Cyprus and, potentially, the United Kingdom.

«From a banking perspective, this measure enables faster NPL reduction and frees the management teams to focus on new businesses», Elisabeth Rudman, managing director and head of EU FIG told to Portuguese news agency Lusa, on the sidelines of a DBRS event about the theme in London.

Since 2016, the Portuguese banks completed two deals, a small number when compared to the 20 NPL securitization done by Italian banks and four other by Irish banks during the same period.

One of the Portuguese deals was led by Caixa Económica Montepio Geral when it sold the €580.6 million NPL portfolio “Evora Finance” in 2017, and the other one was closed last year by Santander Total bank, when disposed a €480.7 million NPL portfolio. DBRS rated both transactions “BBB” (low), noting though that “Évora Finance” is performing well above the initial forecast.

The rating agency also states the European Banks have made substantial progresses in reducing the huge NPL pile accumulated since the financial crisis, but several countries whose banks still have huge levels of NPL «still have a long way to go».

Legal and tax reforms were implemented in Portugal to help dealing with this problem but, in general the European banks keep struggling to collect outstanding debts and foreclose mortgages, besides the low yield profitability and pressures over the capital levels.

Original Story:Diário de Notícias | Lusa 
PhotoFree /Alfonso Romero
Edition and Translation:Prime Yield

Bain Capital buys the €850 million bad credit portfolio “Atlantic” from Caixa

After its 2017 debut, throughout buying a €500 million portfolio, the nonperforming asset manager Bain Capital keeps investing in Portugal, having now closed the acquisition of project “Atlantico”, with a gross book value of 850 million, from the Portuguese bank Caixa Geral de Depósitos.

In its Report and Consolidated Accounts from 1stSemester 2018, the Portuguese public bank announced it would be selling the non-performing loans portfolio named “Atlântico”. In the occasion, Caixa’s president, Paulo Macedo, stated that the public offer had attracted several potential buyers. According to him, this transaction would allow Caixa’s NPL ratio to be under 10%.

After completing two transactions, Bain Capital admits its plans to keep investing in Portugal. «I assume we’re going to [buy more]. (…) We like the fact this is a small market, and, because of that, some of our major competitors don’t participate that frequently», Alon Avner, Bain Capital Credit’s Europe responsible, explains.

Original Story: ECO
Photo: Caixa Geral de Depósitos
Translation and Edition: Prime Yield

Brazil holds interest rates at a record low

Brazil’s central bank held interest rates at a record low on last February 6thas expected, signalling it is in no rush to change them even though inflationary pressures have cooled, notices Reuters.

The bank’s monetary policy committee, known as Copom, voted unanimously to keep the benchmark Selic rate at 6.50% for the seventh straight meeting. According to Reuters, economists and investors are beginning to consider the possibility that rates could even be cut later this year. Although inflation risks have eased since its December meeting, Copom gave no indication it is moving in that direction too.

«The Committee judges that, since its previous meeting, notably related to the global outlook, inflationary risks have moderated,» Copom said in a statement accompanying the decision.

The central bank said the shifting global risks included greater odds of a global slowdown and easing short-term risks associated with normalizing interest rates in advanced economies.

Much will depend on how the economy performs in the coming months and the fate of the government’s economic reform agenda, which some see stimulating growth in the second half of 2019.

Based on market exchange rate and interest rate projections, Copom forecast inflation of 3.9% this year, unchanged from December but still below its 4.25% annual target.

The Brazilian real has strengthened around 5% since December’s policy meeting, largely on growing optimism that new right-wing President Jair Bolsonaro will deliver on his promise of ambitious economic reforms.

The central plank of that reform agenda is overhauling Brazil’s pension system, which could save the state up to 1.3 trillion reais ($350 billion) over the next decade and help the central bank to keep rates low — or even cut them further.

A stronger Brazilian currency will also help to cool price pressures. Interest rates futures markets are already pricing in around 20 basis points of easing by the end of the year.

Original story:Reuters |Jamie McGeever
Photo: Svilen Milev
Edition: Prime Yield



Spanish Banks must improve historic lows profit margins

The improvement of their profit margins, still at historic lows, is one of the main challenges posed to the Spanish banks in 2019, according to ratings agency Standard & Poors (S&P).

Looking forward, S&P predicts more mergers among medium sized Spanish banksthis year, given the low profit margins that the sector is suffering, and that most are trading in the stock market below their book value. S&P believes that Spanish banks are well positioned, with sanitised balance sheets and favourable perspectives in terms of credit quality. However, the agency points out in its report that, after years of rating upgrades for Spanish banks, which have put them «very close to the levels of December 2011, and even before the crisis», 2019 could also see some downgrades. The agency predicts that in 2019 toxic assets on the balance sheets will continue to be reduced and that the main challenge will remain improving profit margins which remain at historic lows. In fact it is this low profitability which will drive consolidation this year which will help achieve synergies, economies of scale and cost cutting.

At the European level, S&P believe it is very unlikely that there will major cross-border mergers this year, despite the political interest in Europe that there should be. The report signals that «Banking Union is still not complete and the execution risks are greater than in domestic consolidation, where it is easier to find synergies».

Finally, S&P rules out 2019 being the year in which the State gets out of Bankia, where it controls 61.4% of the capital. Rather it predicts a «very gradual» process of withdrawal.

Original Story: The Corner
Photo: /Xexo Xeperti
Edition:Prime Yield


IMF insists reduction of Greek bank’s NPL must be expedited

The International Monetary Fund (IMF) has just reiterated the need to undertake coordinated steps to expedite the reduction of nonperforming loans (NPLs) held by Greek banks.

Greece’s creditors have long cited NPLs as a major vulnerability of the Greek economy.

Speaking during a press briefing in Washington (USA9, IMF spokesman Gerry Rice sid that the organization’s executive board will in March discuss the report drafted by the IMF mission which recently visited Athens within the context of Greece’s post-bailout surveillance.

Original Story: Ekathimerini
Photo: Remos
Edition:Prime Yield

Santander sold Cerberus the €600 million “Project Tagus”

Santander Portugal closed the sale of the €600 million “Project Tagus” to an affiliate of US Cerberus Capital Management.

According to information gathered by the Portuguese news platform ECO, the transaction was closed in December 2018; having a positive impact of € 50 million for the bank’s results last year.

This portfolio comprises toxic assets belonging to former Popular Portugal bank, having sparked the interest of Apollo, Bain Capital and Arrow Global.

During the bank’s results presentation, CFO Manuel Preto explained that these real estate assets and loans became Santander Totta’s property with the integration of Popular Portugal at the end of 2017. «We tried to quickly alienate these assets, because we believe the bank’s management should be focused on granting new credit to the economy and not managing portfolios which are already adequately provisioned and which do not add much to the bank’s results», quotes the same source.

Original Story: Iberian Property | Ana Tavares 
Photo: Santander
Edition:Prime Yield

Brazil Government supports foreign land purchases

Brazil’s land issues secretary within the Agriculture Ministry said that the government offers its support for foreign investors interested in buying land in Brazil, a practice which is currently prohibited.

A change to the law to allow foreigners to directly purchase land would require Congressional approval, Secretary Nabhan Garcia told reporters.

Original story: Reuters | Jack Spring and Anthony Boadle
Photo: FreeImages/ Marcel Krings
Edition: Prime Yield

Brazil current account deficit doubles, FDI inflows rise in 2018

Brazil’s current account deficit doubled in 2018 as economic growth fuelled demand for foreign goods and services, while foreign investment reached its highest share of GDP since 2001, reveals the country’s central bank.

The deficit remains narrow enough not to dim the generally positive outlook for Brazil that is taking shape among international investors for the year ahead.

Brazil’s current account deficit last year rose to $14.51 billion, or 0.77% of gross domestic product (GDP), almost exactly double the $7.235 billion shortfall registered the year before, equivalent to 0.35% of GDP.

Imports rose 21% on the year while exports rose 10%, which narrowed the trade surplus to $53.59 billion from $64 billion the year before.

But economists at Citi said the current account deficit, a broader measure of trade and capital flows, remains «comfortable» at less than 1% of GDP.

Investors are paying close attention to plans of the government to increase Brazil’s economic competitiveness via a mix of tax cuts, privatization and, most importantly, pension reform. The latter could save up to 1.3 trillion reais over the next decade, according to Economy Minister Paulo Guedes.

Some $88.3 billion of foreign direct investment (FDI) poured into Brazil last year, the central bank said, exceeding its earlier projections of $83 billion. Net FDI flows over the 12 months to December totaled 4.7% of GDP, the highest since June 2001, the central bank said.

Investors pulled funds out of Brazilian financial markets last year, however. Central bank figures showed that foreign investors withdrew $4.265 billion from Brazilian stocks in 2018, the most in a decade.

The pace of foreign inflows into Brazilian financial assets is expected to pick up this year, however, with investors attracted by Bolsonaro’s market-friendly policies and by relatively high interest rates.

Amundi, Europe’s largest fund manager with 1.45 trillion euros of assets under management, already said that Brazil is emerging as one of the most attractive destinations for long-term investment in local currency debt instruments.

Brazil’s benchmark Selic interest rate stands at 6.50%. That may not rise much if at all this year, thanks to the uncertain global economic outlook, but a growing consensus among international investors is that is an investment risk worth taking.

Original story:Reuters |Jamie McGeever and Marcela Ayres
Photo: Neves
Edition: Prime Yield

Eurozone banks shed €30bn of NPL in 3rdquarter

The euro zone’s top banks shed some € 30 billion worth of unpaid loans (NPL) in the third quarter of 2018, in a new sign that European Central Bank pressure to clean up their balance sheets is bearing fruit.

The ECB wants banks to sell or provision for the bad debt they’ve inherited from the last recession so they can focus on extending fresh credit and are better prepared to withstand any new downturn.

ECB data showed NPL and advances held by the euro zone’s 107 top banks fell to € 627.7 billion, or 4.17% of the total, in the three months to September.

That was down from € 657.15 billion, or 4.40% of the total, and the end of the second quarter.

Large falls were seen in Cyprus, Italy, Greece, Portugal and Spain, and also in Germany. Even though, soured credit inherited from the last recession still accounted for a fifth of the loan book of Cypriot banks and for 40% of bank credit in Greece.

Original Story:Reuters | Francesco Canepa
Photo: Szymon
Edition:Prime Yield

Italian banks struggle to pacify ECB NPL push

Only two weeks into his new job as the eurozone’s single banking supervisor, Andrea Enria is already at the sharp end of rebukes from Italy’s populist government.

In mid-January, Monte dei Paschi di Siena, now majority state-owned, announced details from the December draft version of its annual supervisory review and evaluation process (SREP). This included an unexpected European Central Bank (ECB) recommendation to bring coverage of its bad-debt pile up to 100% within seven years – something the market thought only stronger banks would have to do.

For Italy’s deputy prime minister Matteo Salvini, the ECB might have been exerting unfair pressure on the country. «The new attack by the ECB supervisor on the Italian banking system and Monte dei Paschi shows once again that the banking union … not only does not make our financial system more stable, but it causes instability,» says Salvini, according to Reuters.

Italy has Europe’s biggest non-performing-loan (NPL) pile, but this coverage policy is eurozone-wide – and, anyway, Italian bank stocks soon recovered. The large and mid-tier Italian banks all issued statements denying a «significant» or «material» impact on their financial forecasts, even though the ECB is also pushing them to reach 100% NPL coverage earlier than many investors imagined.

Gross bad debt in Italy alone still amounts to about €200 billion, after all, with average coverage ratios ranging from about 45% to 60%, according to UBS.

Moving towards provisioning 100% of existing NPLs will cost Italian banks on average about 47 basis points of capital annually for the next two years alone, with the total cost (€63 billion) about three times more than for the laxer targets the market had assumed, according to Giovanni Razzoli, banks analyst at Equita in Milan. «There will be an increase in banks’ coverage from these requests,” he says. «The banks are trying to downplay the situation, but the impact on some is quite significant».

Original Story:Euromoney | Dominic O’Neill
Photo: Matic Zupancic
Edition:Prime Yield

Portugal’s NPL stock is still too high, says ESM

Despite all the progress towards the reduction its NPL stock pile since 2016’s peak, Portugal’s bad debt level is still among the highest within the Eurozone, warns the European Stability Mechanism (ECB), while recalling the need to further enhance the efforts to reducing it.

At a conference organized by Fitch in Lisbon a few days ago, Matjaž Sušec, the assistant director of the Strategy and Institutional Relations of the ESM, noted, that the Portuguese banking sector is definitely more resilient, «but some of the challenges are still there».

Four recapitalizations allowed for the banking system to go through a major «clean-up» of its accounts. The NPL level is now one third below the peak recorded in 2016, and in 2018, the country’s banking system presented its best results since the crisis. However, regardless of these signs of progress «Portugal still presents very high levels of NPL, one of the highest in the Eurozone», Sušec added.

For the ESM’s director, «enhancing asset quality a very important step if we want to improve the banking system’s resilience and its capacity to finance the economy».

The specialist also noted that the debt pile of the country was still very high, but that the current recovery has allowed for the country to have a larger fiscal buffer, as fiscal revenue increases and debt progressively decreases.

During his speech, the ESM’s representant noted that Portugal has reinforced its status as a country which «successfully overcame the crisis» and that the country’s positive economic performance has opened the door to new financial markets, making it «less vulnerable to shocks».

Original story:Dinheiro Vivo | DV/Lusa
Photo: / Svilen Milev
Translation & Edition:Prime Yield

Greece: Political storm, NPLs delay issue

Greece’sFinance Ministry is putting off the issue of a five-year bond, which is all set-in technical terms, until the domestic political dust settles and the effort to reduce the credit sector’s bad-loan stock results in a breakthrough.

The anticipated conclusion of the parliamentary process over the Prespes agreement will remove one of the two main obstacles blocking Greece’s return to the money markets, but the issue of the nonperforming loans still needs to be resolved before a new bond issue.

The milestone that Finance Minister Euclid Tsakalotos has set for the process to start in the markets is the submission to the European Commission’s Directorate General for Competition (DG Comp) of the plan for the reduction of banks’ NPLs processed by the Hellenic Financial Stability Fund and presented by the minister to the creditors’ mission chiefs this week.

The government expects that to give the markets a strong signal that the process of bringing NPLs down to a more manageable level is under way.

The government hopes to have the plan submitted before the end of February, as Brussels’s approval will formally open the way for the implementation of the HFSF blueprint, granting political points to the ruling party ahead of the general election. As Fitch stressed this week, the NPL reduction plan could be a game changer for the sector, decisively helping toward the restoration of confidence.

The planning of the Public Debt Management Agency provides for the issue of a five-year paper whose value will not exceed 2-3 billion euros. Analysts estimate that the interest rate could come to 3.5-3.75%, noting the favourable climate in the markets that the government should make the most of.

As Swiss daily Neue Zuericher Zeitung noted, the hunt for yields has resumed internationally, and the next one to benefit from that could be Greece, following the recent issues by Italy, Ireland, Portugal and Spain. After all, the secondary market rate of Greece’s five-year bond has dropped to six-month lows in the last 10 days.

Original Story:Ekathimerini |Eleftheria Kourtali
Photo: Kolokotronis
Edition:Prime Yield

Portuguese REITS have come into force

Starting February 1st, a REITs regime has come into force in Portugal.

Known as SIGI – Sociedades de Investimento e Gestão Imobiliária, the Portuguese REITS are regulated by the legislative decree nº19/2019, published in Diario da República on 28thJanuary.

This legislation sets a minimum share capital of €5 million to create a SIGI, which has to be listed into the stock market. Among all the other requirements which can be found in the diploma, for instance these societies have also a limited indebtedness level correspondent to a maximum of 60% of its total assets value.

Aiming to boost even further the real estate investment activity in Portugal, and particularly the home rental market, the SIGI portfolios must include property assets dedicated rental or to be explored in other ways of long term economic use. Even though the residential market is appointed as its main focus, it is not obligatory as the SIGI may also invest in other asset classes, such as retail, logistics or offices, for instance.

Original Story: Vida Imobiliária | Fernanda Cerqueira
Photo: Humberto Plácido da Silva
Translation and Edition:Prime Yield

Novo Banco puts its focus in NPL and Real Estate sales

Focused on cleaning its balance sheets and in the reduction of its NPL stock, Portuguese Novo Banco has advanced with the sale of a NPL portfolio worthing €1 billion and of other €500 million in real estate assets.

According the Jornal de Negócios, which quotes Debtwire, the Portuguese bank led by António Ramalho is already receiving proposals from financial advisores for the placement of the real estate portfolio in the market, which is expected to happen still in this quarter. In the race to advise this sale are well known names such as Alantra, Deloitte and PwC, among other. The sales process is expected to be completed by June.

So, after “Project Nata”, a NPL portfolio with a gross book value of €2.15 billion sold last December to a JV from KKR and LX Partners, the bank is now putting for sale the “Project Nata 2”, other NPL portfolio worthing €1 billion.

Also, in progress is the sale of “Project Viriato 2”, a €500 million real estate portfolio consisting mainly of commercial and industrial assets spread in the Lisbon region, writes the same publication, remembering that the disposal of “Projecto Viriato 1” generated a sales result of €388 million.

Original Story: Idealista | Idealista News
Photo: Novo Banco
Translation and Edition:Prime Yield