Greek banks eliminate emergency borrowing from Bank of Greece

Greek banks’ full repayment of emergency liquidity assistance (ELA) drawn from the domestic central bank is credit positive as it reduces their funding costs, ratings agency Moody’s said in a credit outlook report.

Greek banks’ outstanding ELA balance was around €1.0 billion at the end of December, or about 0.4% of the banking system’s total assets, down sharply from a peak of €86.8 billion reached in June 2015 at the height of the debt crisis.

Deleveraging, coupled with the gradual return of deposits, helped banks improve their funding profile, allowing them to fully repay the emergency funds they borrowed from the Bank of Greece over the past three and half years.

«Without their dependence on ELA and given the sustainable improvement in liquidity conditions, Greek banks will likely attract greater interest from international unsecured bond investors,» Moody’s said.

It said Greek banks were also able to repay the ELA balance by increasing their interbank repo transactions as international banks’ appetite for Greek assets gradually increased over the last years.

The ELA repayment helps to strengthen depositors’ confidence in Greek banks, allowing them to attract more deposits. Between June 2015 and February 2019, private-sector deposits rose by about 8% as market sentiment, economic activity and employment began to improve.

More expensive than borrowing from the European Central Bank, the ELA’s full repayment helps lenders to diversify their funding mix.

«Greek banks started issuing covered bonds as an alternative source of funding to repay their ELA balance amid increased appetite among international investors for Greek banking risk,»the report said.

National Bank was the first of the large Greek banks to fully eliminate its ELA exposure in December 2017, followed by Piraeus Bank in July 2018.

Last month Alpha Bank told investors it had fully eliminated its ELA in February as did Eurobank. The two lenders were the last of Greece’s four big banks to fully eliminate their emergency borrowing from the Bank of Greece.

Much smaller Pancretan Cooperative Bank fully repaid its ELA exposure in August 2017, while Attica Bank repaid its exposure in the second half of March this year, Moody’s said

Original Story: Reuters | George Gerogiopoulos
Photo: Bank of Greece
Edition:Prime Yield

Portugal banks’ NPL ratio shrinks to 11%, says Fitch

Portuguese banks should take advantage of the benign economic and political environment to accelerate along this year the cleaning of the problematic assets still standing in their balance sheets, Fitch advises.

«2018 was another year of significant balance sheets’ cleaning for the largest Portuguese banks», underlines the rating agency Fitch, adding that its non-performing loan (NPL) ratio fell to 11% by the end of the last year, four percentage points below 2017.

Analysing the results of Portugal’s major banks – BPI, BCP, Banco Montepio, Caixa Geral de Depósitos, Novo Banco and Santander Totta -, Fitch explains this improvement in the NPL ratio was due to a «mix of credit cures, write-offs and active portfolio sales». According to the agency, these banks can benefit from the «benign economic and political environment in 2019 to accelerate their problematic assets’ reduction, including real estate assets and problematic estates».

By the end of September, the Portuguese banks held more than €30 billion in toxic assets in their balance sheets, according to data from Banco de Portugal (Portugal’s Central Bank).

Fitch also adds that the financial institutions provisioning efforts will continue along this year, «since Europe’s Central Bank (ECB) requires higher NPL coverage ratios». «This will hinder the sector’s already weak profitability», stresses the rating agency. «However, the Portuguese banks will have a relatively long transition period to improve their NPL coverage ratio» it says, adding that the sector’s coverage ratio stood above 50% in the end of 2018.

Original Story: ECO | Alberto Teixeira
Edition & Translation:Prime Yield

BBVA launches new loan interest rate linked to borrower’s digital maturity

Spanish bank BBVA is introducing a new type of corporate loan that sees its interest rate decline as the borrower makes progress towards «digital maturity».

As firms across industries face up to the digital revolution, BBVA is looking to give them an added incentive with its new D-Loan.

The price of the loan is linked not only to the borrower’s credit profile but also its digital maturity, which is determined after analysis from a consulting firm. Borrowers and lenders agree on digital score targets throughout the life of the financing and if these are met, the loan pricing is reduced.

Singapore-based food and agri-business outfit Olam International is the first to sign up for a D-Loan, a $350 million revolving credit facility involving BBVA and six other banks.

Boston Consulting Group is carrying out the digital analysis, which will be revised each year, taking into account things such as the priority given to digitisation within the company, different initiatives and roadmaps implemented, digital marketing models, and how innovation is fostered.

Ricardo Laiseca, head, global finance, BBVA, says: «We believe that companies that undertake a digital transformation will be the winners in their sector in the long term; digitisation translates into greater competitiveness and profitability, which will allow these companies to be ahead of the competition

Original Story:FINExtra | News
Photo: BBVA site
Edition: Prime Yield

Bank of Portugal cuts 2019 growth forecast as exports slow

The Bank of Portugal downgraded its projections for the country’s economic growth this year, saying that it sees gross domestic product (GDP) swelling by 1.7%, while maintaining projections for 2020 and 2021, when growth is seen slowing to 1.6%.

In its March Economic Bulletin, central bank reduced its 2019 growth forecast by 0.1 of a percentage point from the 1.8% it had been projecting in December, citing a global slowdown and international trade tensions. It sees growth staying at 1.7% in 2020, before slowing to 1.6% in 2021 – the latter figure in line with previous projections.

The slight downward revision in 2019 GDP is, according to the bank, related to the greater dynamism of imports than exports, which will result in a «negative trade balance in goods and services from 2020».

However, it anticipates a maintained «surplus on the current and capital balance, along the projection horizon, with an important contribution from European Union transfers in this period».

The projection for inflation was also revised down by the bank, by 0.6 of a percentage points in 2019, to 0.8%, and by 0.3 of a point in each of 2020 and 2012, to 1.2% and 1.3% respectively.

The report foresees export growth of 3.8% in 2019, 3.7% in 2020 and 3.6% in 2021, thanks to stronger external demand directed to the Portuguese economy plus small gains in market share, mainly associated with tourism. However, it notes, growth «should slow down along the projection horizon» as it did last year.

Imports, meanwhile, are expected to swell 6.3% this year, 4.7% in 2020 and 4.1% in 2021.

As for employment, it is projected to continue to grow, albeit at a gradually slower pace, reflecting «the maturation of the economic cycle and the increase in restrictions on the level of labour supply».

The jobless rate – which averaged 7% last year – should fall to 5.2% by 2021, according to the report.

In the report, the bank also notes continuing risks and constraints specific to Portugal in the medium and long term – demographic, technological and institutional – as well as the high levels of indebtedness of economic agents. Against that background, it argues, «it is essential to create conditions that promote increased productivity through better allocation of resources, the smooth functioning of product and labour markets and the commitment to human capital and innovation.»

Original Story:Macau.Business | Lusa
Photo: Free Pingue
Edition:Prime Yield

Profits fall sharply at Alpha and NPG on NPL reduction

Greek lenders Alpha Bank and National Bank reported a sharp fall in profit in the last quarter of 2018 as they focused on reducing their piles of bad loans.

Alpha, Greece’s fourth-largest lender by assets, reported a net loss from continuing operations of €0.4 million in the October to December period after a net profit of €41.1 million in the third quarter. The lender, which is 11% owned by the country’s bank rescue fund HFSF, attributed the loss to weaker trading gains and higher credit-loss provisions.

Net profit from continued operations at National Bank (NBG), the country’s second largest lender, shrank to €1 million from €8 million in the third quarter as trading losses weighed on its bottom line.

Greek banks are working to reduce their bad debts and meet targets on so-called nonperforming exposures (NPEs) agreed with European Central Bank regulators.

Alpha CEO Vassilis Psaltis said in a statement that reducing NPEs – which include nonperforming loans (NPL) and other credit likely to turn bad – and delivering competitive services were the bank’s priority.

The bank goal is to reduce its NPEs by €14.3 billion by 2021, he said. In the meanwhile, Alpha bank’s NPL ratio dropped to 33.5% of its loan book from 34.1% at the end of September, while provisions for impaired credit rose to €669 million from €296 million in the third quarter.

As for NBG’s, the NPE ratio fell to 40.9% from 42.2% in the third quarter and the lender aims to squeeze it to below 15% by 2021. CEO Paul Mylonas said in a statement that would mean an €11.5 billion reduction by the end of 2021, with €4.5 billion of that coming this year. He also described the new strategy for managing bad loans as front-loaded and more ambitions.

Original Story:Ekathimerini | Reuters
Photo: Alpha Bank
Edition:Prime Yield

Eurozone «not resilient enough» to weather another economic crisis, the IMF warns

The eurozone is in better financial shape than a decade ago, but not solid enough to withstand another economic crisis, the head of the International Monetary Fund said.

IMF Managing Director Christine Lagarde told a Paris conference that the currency union «is not resilient enough» to emerge unscathed from «unexpected economic storms»

Lagarde acknowledged that the currency union was now «more resilient» than a decade ago when the global financial crisis struck. «But it is not resilient enough,» she said.

«Its banking system is safer, but not safe enough. Its economic well-being is greater overall, but the benefits of growth are not shared enough,» Lagarde told the gathering, which was organised by the French central bank.

The warning comes as signs are multiplying of slower economic growth, especially in powerhouse Germany and the bloc’s second-biggest economy, France.

On March 29th, indications of a weak first quarter for the eurozone mounted as a closely-watched survey pointed to March output being dragged further down by manufacturing weakness. Manufacturers in the 19-nation single currency bloc «reported their steepest downturn for six years» as pressure mounted from trade wars and Brexit fears, data company IHS Markit said.

On Wednesday, march 27th, the European Central Bank added to growth worries when its chief Mario Draghi hinted that interest rates would stay low for longer than previously anticipated, to stimulate growth and inflation.

«Some can rightfully argue that Europe has been slow to produce a fully developed financial ecosystem», Lagarde warned, saying Europe was still wounded from the last crisis.

«These events left painful economic scars on many households and companies, sowing the seeds of economic disparity across member countries and within», she said, adding that «now is the time to give euro area finance another big push».

She called for the eurozone to «show new resolve and complete the banking and capital markets unions, so it can harvest the benefits now and in the future».

On banks specifically, she said «we need a European banking system that can bend in a storm without breaking, we need a banking system that will truly diversify risks across the ecosystem and irrigate growth».

Original Story:France 24 |  APF
Photo: Szymonn
Edition: Prime Yield

Brazil central bank cuts 2019 growth forecast

Brazil’s central bank will take its time analysing the economic impact from an increasing number of shocks from abroad and rising political tension at home that appear to be slowing the government’s reform process, its president said.

In his first press conference as central bank chief, Roberto Campos Neto also said that volatility and uncertainty have increased lately, but noted that the current global economic slowdown is not severe enough to threaten global liquidity.

Speaking after the central bank cut its 2019 economic growth forecast to 2.0% from 2.4% in its quarterly inflation report, Campos Neto said policymakers must look through short-term market, economic and political volatility when deciding policy.

«Regarding recent shocks, the main message is inflation risks are now symmetrical, down from asymmetrical (to the upside), so we need more time,» he told reporters, noting that this signals policymakers have no bias regarding their next move.

Specifically, growth and inflationary pressures have weakened recently due to persistent slack in the Brazilian economy, a global slowdown, and rising uncertainty over domestic reforms, he added.

Campos Neto said he is confident the government’s signature plan to slash social security spending will be approved but admitted that the political environment had deteriorated recently, and market optimism has diminished.

This has slammed Brazilian markets, prompting the central bank to carry out a US$ 1 billion repurchase operation to relieve pressure on the Real. This is an “appropriate” step at the appropriate time, Campos Neto said, and does not represent a change in strategy.

Interest rate traders are almost fully discounting a central bank rate hike from the current record low 6.50% within the next year. Last week, they attached a 50-50 probability rates would be cut.

Original Story: MercoPress| News
Photo: FreeImages.copm/BrunoNeves
Edition:Prime Yield



Non-performing credit grows for the first time in almost 18 months

For the first time in almost 18 months, in January Spain’s Non-Performing Loans (NPL) stock increased from the previous month, going 0.2% up to €67.330 million and breaking the downward trend that had been recorded since July 2017, data from Banco de España show.

However, Spain’s NPL volume is now 28% bellow the stock recorded in January 2018, keeping the same homologous trend than the previous months. As for the total credit stock there was also a monthly decrease of 1% in January, standing at €1,141 billion – a 3.5% y-o-y decrease.

According to these latest figures released by Spain’s Central Bank, there has also a slight increase in the NPL ratio, from 5,84% in December to 5,89% in January, with this indicator growing for the first time since January 2018.

Original Story: La Vanguardia | Oscar Gimenez
Photo: Banco de Espana
Translation & Edition:Prime Yield



Greek banks contemplate even more ambitious NPL reduction target

Continuing pressure by the Single Supervisory Mechanism (SSM) has reportedly reinvigorated Greece’s systemic banks’ efforts to reduce the Olympus-sized «mountain» of «bad debt» burdening their balance sheets, in the wake of the most recent ECB report showing Greece with the highest percentage of NPLs amongst all Eurozone member-states, reports.

According to several sources quoted by “Naftemporiki”, new targets to reduce NPLs will be announced by the end of the month, with a comprehensive plan to again be handed to the SSM. The same reports point to even more «ambitious» targets for Greece’s thrice bailed-out systemic banks.

An addendum will also, according to reports, include new NPLs created after April 2018.

The previous target, which is far from being attained, called for a reduction of NPEs (non-performing exposures) of €50 billion by the end of 2021, bringing bad debt listed on banks’ balance sheets from €82 billion to €32 billion.

At the same time, bank officials in Athens have repeatedly noted that it is extremely difficult to exceed a rate of reducing NPLs by more than €3 billion every trimester.

Original Story: Tornos News
Photo: Kolokotronis
Edition:Prime Yield

EC Member States agree new rules to develop secondary NPL market

The European Commission welcomes the agreement by EU Member States on new measures to reduce high stocks on non-performing loans (NPL), by developing secondary markets for sales of these problematic assets while maintaining a high level of borrower protection.

As part of the efforts todeliver on the Council’s Action Plan to tackle NPLs in Europe, the new measures will encourage the development of a secondary market where banks can sell their NPLs to credit servicers and investors, thereby contributing to a reduction in high stocks of NPLs in the EU, a remaining legacy risk from the financial crisis. «This is essential for the financial stability of the EU and it is a crucial factor for completing the Banking Union», says the European Comission in a press release.

Valdis Dombrovskis,Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union said this agreement «is a further step towards reducing non-performing loans in Europe and increasing the resilience of the European banking sector. I am counting on swift progress on the discussions of our proposed rules in the European Parliament. These rules allow us to progress towards reinforcing the Economic and Monetary Union».

The Directive introduces a harmonised and less restrictive regime for credit purchasers and servicers and removes undue impediments to cross-border activity, while ensuring that the same level of consumer protection is maintained when a loan is sold by a bank. While today’s agreement is an important step forward, progress has been regrettably slower on complementary elements of the Directive that would increase the efficiency of enforcement regimes. Further work and discussion on these elements will be needed and should be prioritised in the next legislative cycle. But given the urgent need to foster development of a well-functioning secondary market for NPLs, the draft rules approved by Member States today should still be finalised in the current legislative cycle.

Original Story: European Commission – Daily News
Photo:European Comission
Edition: Prime Yield

Bain, Cerberus and KKR compete for the largest NPL portfolio in Portugal ever

The sale process of Novo Banco’s “Projeto Nata 2”, a NPL portfolio with a gross nominal value of €3.3 billion, is now underway. Being the largest portfolio to ever be sold in Portugal, this project is attracting the interest of very-well known investors as Bain Capital, Cerberus and KKR, which are competing to take these problematic assets.

«Nata2» sales process is still in the very early stage, and is being coordinated by Alantra, the advisor of Novo Banco on the bidding process. The bank is also being assisted by KPMG consultants. The goal is to close the deal by the end of the third quarter of 2019.

Project Nata II comprises about 1,000 credits granted to companies which have been in default, and that had been given by the bank in the former BES period. About 30% of these contracts are secured, while the rest is unsecured. Its sale will help the Portuguese bank to reduce the bank’s Non-Performing Exposure (NPE) ratio to 12% by the end of the year.

Original Story: ECO Eco News
Photo: Novo Banco
Edition: Prime Yield

Cerberus appoints Arrow Capital to manage €750 million logistics portfolio

Arrow Capital Partners has been appointed by an affiliate of Cerberus Capital Management to assist in the management of an €750 million portfolio of light industrial and logistics assets in Spain.

The industrial portfolio includes over 1,000 light industrial and logistics assets totalling approximately 5,000,000 sqm located close to Spain’s major cities and transport hubs with circa 60% within the Barcelona and Madrid metropolitan areas. The portfolio will be managed by Arrow Capital Partners’ Spanish team established in early 2018, based in Madrid and led by Howard Barnes.

Robert Falls, Managing Director at Cerberus European Servicing, Ltd, Cerberus’ affiliated advisor with regards to asset management, property management, and loan servicing platform, commented: «We are pleased to be partnering again with the team at Arrow Capital Partners to assist us with the management of our industrial portfolio in Spain. We’ve developed a great relationship with Arrow Capital Partners over the years through various European mandates and we look forward to leveraging their expertise and capabilities in the Spanish market

Howard Barnes, Head of Spain at Arrow Capital Partners, says: «As the Spanish economy continues to recover from the financial crisis, we are seeing some excellent entry opportunities, particularly for us as we are looking to acquire light industrial and logistics assets of over €200 million in the next year or so. As growth in Spain’s e-commerce sector continues off a low base, a marked supply / demand imbalance has developed in the light industrial and logistics sectors, increasing rents and capital values


Author: IPE Real Assets
Photo: Full
Edition: Prime Yield


Brazil’s Caixa Económica Federal plans to sell real estate to repay public debt

Under new management, the biggest state-owned bank in Brazil, Caixa Economica Federal,plans to restructure itself by selling distressed real estate and equity stakes in subsidiaries.

Chief executive officer Pedro Guimaraes is overseeing this planned asset sales by the State-owned bank to repay perpetual bonds issued by the Brazilian government that total approximately $R 40 billion ($11 billion).

Caixa has assets valued at R$ 1.3 trillion, and all extraordinary gains from asset sales “will be used to repay that debt,” Guimaraes said in an interview with Bloomberg.

Guimaraes has approached investors focused in distressed real estate to gauge their interest in buying assets that Caixa has seized. The bank valued its portfolio of seized assets, mostly defaulted mortgages, at nearly R$ 8 billion as of September, more than any other Brazilian bank.

Caixa also may sell some non-distressed real estate assets, including all or part of 15 buildings in Brasilia, where the bank is based, and seven buildings on Paulista Avenue in Sao Paulo.

In recent years, the bank has struggled with low returns on assets and controversy, including allegations that Caixa officials have loaned money in exchange for bribes.

The new CEO of Caixa plans dual listings in Brazil and New York to sell minority stakes in bank subsidiaries in the insurance and bank-card businesses.  Guimaraes said the bank’s lottery and asset-management subsidiaries will go public in 2020. The bank could collect R$ 15 billion in proceeds from the four sales.

Among other plans, Caixa would auction the right to use its 26,000 offices – the largest branch network in the Brazilian banking industry – to sell insurance and card-processing products that generate fees for the bank.

Caixa has a loan portfolio valued at R$ 694 billion, which has grown nearly 10-fold over the past 10 years, largely because of efforts by previous administrations of the national government to provide low-cost credit through state-owned banks.

The Brazilian government supported that effort by lending Caixa $40 billion through a perpetual bond issue.

Original Story:  The Real Deal | Mike Seemuth / Bloomberg
Photo: Caixa Econômica Federal
Edition: Prime Yield

Greek NPLs at the focus of international investors

Greece is now firmly at the focus of international entities investing in nonperforming loans, despite the uncertainties within those funds on the future returns of such investments and their reservations about the country’s administrative environment.

According to a survey conducted by London-based multinational law firm Ashurst, almost half of the investors (46%) said it is possible they will invest in NPLs in Greece in the next couple of years. The country ranks second in investor preferences, behind Italy, in which 51% of survey respondents said they intend to invest.

Greece is also second in the share of investors who have already invested in Greece in the last two years – 39% against Italy’s 43%.

«Given that the Greek market remains at its formative stages, it’s notable that some 39% of investors report that they already invested in Greece. Appetite there remains high with almost half of investors stating that they are likely or more to invest there in the next two years. With 2018 seeing the first two major secured NPL transactions in Greece successfully conclude, the Greek legal and regulatory environment appears to be entering the new world of NPLs with a renewed sense of commitment», Ashurst partner Olga Galazoula.

The responsible also noted that «Greece’s economy remains susceptible to wider market shocks. The first half of 2019 will prove pivotal in assessing Greece’s prospects as a sustainable NPL market, with the country in pre-election mode. It also remains to be seen if the recently renewed calls for the establishment of an asset management company to deal with the systemic NPL issue bear fruit this time round».

Original Story: Ekathimerini | Eirini Chrysolora
Photo: JonteRemos
Edition: Prime Yield

Write-offs are the main tool for the cleaning up of Portuguese banks’ balance sheets

The Portuguese banking system’s non-performing loan (NPL) ratio continued to decline, to 11.7% as of Q2 2018 (and 11.3% as of Q3 2018), after peaking at 17.9% as of Q2 2016. This 6.2 percentage points contraction in the NPL ratio is mainly due to a nearly 40% reduction in non-performing loans outstanding amount, compared to a 2.1% decline in total loans outstanding amount.

According to the Bank of Portugal’s data, 42% of the decline in the NPL ratio is due to write-offs. Sales and securitisations accounted for 23% of the ratio’s decline. Nearly two thirds of the cleaning up of Portuguese bank balance sheets occurred via the removal of non-performing loans from the banking system.

Moreover, the reclassification of NPL as “performing loans” more than offset the flow of loans that turn non-performing. The net flow of non-performing loans contributed to a 24% reduction in the NPL ratio.

Breakdown of the decline in the NPL ratio in Portugal between Q2 2016 and Q2 2018

Original Story: FXStreet 
Photo: Banco de Portugal
Edition: Prime Yield