Greek Government seeks additional solutions to clean up bad-loans from banks

Greece’s government is seeking out additional systemic solutions for the banks’ bad-loan problem, beyond the state’s Hercules plan, Finance Minister Christos Staikouras revealed. His comments came after Bank of Greece Governor Yannis Stournaras said that Hercules is a step in the right direction but is not enough.

«We are open and already looking for other, realistic, innovative and effective systemic solutions, » besides Hercules, Staikouras said in an interview to Bloomberg, adding that Greece will eventually manage to shrink the nonperforming loans ratio to below 10%.

Stournaras had referred to the need for a more holistic solution that would also tackle the problem of deferred tax assets, reintroducing the BoG proposal that was not submitted for approval to the European Commission.

Bloomberg noted that Greece, which had an NPL rate of 39.2% at the end of June, has the highest ratio in the eurozone. The Hercules project is seen reducing NPLs by €30 euros thanks to the collateral of €9 billion euros it offers.

Staikouras also told Bloomberg that Athens is negotiating with the country’s creditors about the use of eurozone national central banks’ profits from Greek bonds (SMPs and ANFAs) for investment instead of cutting the national debt.

Original Story: Ekathimerini | Eirini Chrysolora
Photo: Photo by Markellos P. from FreeImages
Edition: Prime Yield

Bradesco NPL ratio stands at 3.6% up to September

Banco Bradesco SA, Brazil’s second-largest private sector lender, reported that third-quarter recurring net income rose 19.6% to R$6.542 billion, in line with a Refinitiv analysts’ estimate, boosted by insurance results and consumer lending.

Analysts at Credit Suisse remarked in a note to clients that operating expenses had disappointed on higher marketing and personnel expenses.

Fee income also came in below the bank’s target, but CEO Octavio de Lazari Junior told the journalists it is likely to end 2019 in the 3% to 7% growth range set at the beginning of the year.

Lazari said he expects the bank to post a return on equity around 20% in the coming quarters, in spite of Brazil’s all-time low interest rates. Bradesco reported a profitability ratio of 20.2% in the third quarter.

The bank aims to speed up growth to hit its target.

«Gains of scale will be essential for the bank to maintain its profitability amid lower interest rates,»Lazari told journalists.

Bradesco’s loan book grew by 3.2% in the quarter, mainly driven by consumer lending and small companies. The CEO said consumer loan growth is likely to keep up its fast pace in coming quarters.

Loans in arrears over 90 days rose to 3.6%, up 0.4 percentage point. The bank said the rise was caused by issues with corporate loans. Loan loss provisions rose 4% from the second quarter.

Original Story: Reuters | Carolina Mandl
Photo: Site Bradesco
Edition: Prime Yield

Intrum, Cerberus and Servdebt compete for Sabadell’s €900 million portfolio

Over the last few years, Banco Sabadell has became one of the most active sellers of non-performing loans (NPL) and its real estate collaterals (REO) portfolios in Spain. And, now, its goal is to sell another NPL portfolio worthing €900 million until the end of the year.

The Spanish bank has already named KPMG to be its advisor in the operation of this so-called “Project Vento”, which sales process has already started. And at least three binding offers have already been presented.

Having already acquired other assets from Sabadell, including its servicer platform Solvia, Swedish fund Intrum is one of the competitors. Also very active within the Spanish bad debt market, the US fund Cerberus is other of the interested; having presented its proposal through its credit recovery subsidiary in Spain, Gescobro. The third offer was presented by the Portuguese company Servdebt, specialized in the management and recovery of unpaid credit and, until now, an unknown name for the acquisition of this type of assets in Spain.

According to some market sources, this deal should be completed until the end of November, and it will reflect a discount between 97% (the average discount rate for the sales closing these days) to 95%.

Project Vento is constituted by several unpaid loans that Sabadell has taken out of its balance sheet in recent years and that are provisioned at 100%, which is why its sale would allow the bank to record profits since the losses from this portfolio were already reported in past financial years.

Original Story: Cinco Dias | Angéles Alconada
Photo: Sabadell Site
Translation & Edition: Prime Yield

Millennium bcp post best nine-month results in 12 years

Portuguese lender Millennium bcp reported a 5% rise in nine-month net, helped by record client numbers and a sharp drop in non-performing assets. 

Millennium reduced exposure to non-performing assets and loans, which have plagued Portuguese banks since the 2010-14 financial crisis, by 27% to €4.6 billion, with impairments and provisions for bad loans dropping 11.2% to €299 million.

Its performing credit portfolio rose by 4.5%, or €1.4 billion, with strong corporate lending accounting for almost half of the growth as the country’s economy continued to strengthen.

«Despite the challenging ECB monetary policy, the truth is these are the best nine-month results we’ve had in the past 12 years» CEO Miguel Maya told a news briefing, referring to pressure from record low interest rates set by the European Central Bank.

Net profit came in at €270 million as Portugal’s biggest listed bank lifted net interest income (NII) by 9.5% year on year to €1.15 billion.

«The increase in net interest income was the fruit of growing activity with our clients,» Maya said. «The evolution prospects are positive supported by a stronger client base and normalisation of the cost of risk

Maya added that client numbers, in Portugal and abroad, rose 5% to nearly 5.1 million, supported by new technology platforms for digital and mobile customers. Those customers now account for nearly 40% of the total client base.

Millennium also operates in Poland, Angola and Mozambique.

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

EU’s NPL stockpile halved since 2015, but remains hefty in Greece and Cyprus

The stockpile of Nonperforming Loans (NPL) in the European Union has halved since 2015, but, and even though all the progresses, remains hefty at lenders in Greece and Cyprus, according to the latest data released by the bloc’s banking watchdog.

The volume of NPLs across EU banks has fallen from €1.15 trillion in June 2015, when they were 6% of total loans, to €636 billion or 3% by June 2019, according to the European Banking Authority (EBA). It looked at a sample of 150 banks that account for over 80% of the sector’s total assets.

The overall drop was due to regulatory intervention, «political determination» to tackle the problem properly, and the boost from economic growth and low interest rates, EBA said.

While the average level of NPLs for the bloc has halved, some countries remain at a high level as they try to tackle a stubborn legacy of NPL stockpiles.

Greece’s NPL ratio was 39.2% in June this year, with Cyprus at 21.5%. Five other countries were above 5%, Portugal included. In 2015, 10 EU countries reported double digit NPL ratios.

Italy recorded the biggest drop, down €145 billion in over the four years, followed by €81 billion in Spain, €60 billion in Britain, and €43 billion in Germany.

Poor loans now account for nearly 8% of Italian loans, down from nearly 17% in June 2015.

«There are significant ongoing initiatives that aim to further boost the reduction of legacy assets both at European level and in specific countries,» the EBA statement said.

As the economy weakens, banks should closely monitor the quality of assets on their books to actively manage their NPLs, it added. 

Original Story: Reuters | Huw Jones
Photo: / Jonte Remos
Edition: Prime Yield

doValue manages Alpha Bank’s €4.3 billion NPL portfolio in Cyprus

doValue, Italy’s largest loan recovery servicer, had reached an agreement with Greece’s Alpha Bank to manage a gross €4.3 billion portfolio of Non-Performing Loans (NPL) and Real Estate Assets (REO) in Cyprus.

A company from the spinning off of Italy’s UniCredit’s debt collection unit, doValue would also manage any of Alpha Bank’s future NPL and REO in Cyprus, it said in a statement.

Under the agreement, doValue’s non-performing assets (NPA) under management in Cyprus rise to about €11 billion out of a total of approximately €20 billion in the country, it added.

In August, Greece’s top four banks agreed to have doValue, then called doBank, manage a combined €1.8 billion worth of their NPL.

Original Story: Reuters |Giulio Piovaccari
Photo: Site AlphaBank
Edition: Prime Yield

Brazil’s loans default held steady at 3.9%

Loan defaults in Brazil held steady at 3.9% while lending spreads narrowed to 30.8% from 31.6, the lowest since January, according to the latest figures released by the country’s Central Bank.

As for the outstanding loans in Brazil, its total amount rose 1.0% in September from the previous month to 3.36 trillion reais ($835 billion), the central bank said.

Original Story: Reuters | Jamie McGeever and Marcela Ayre
Photo: FreeImages / BrunoNeves
Edition: Prime Yield

EU gives the green light to Athens’ scheme to clean up NPL’s from banks sheets

The European Union (EU) has approved a Greek government scheme designed to help its banks rid themselves of toxic debts, after ruling that it does not breach rules barring its member states from providing unfair financial assistance. 

Greece’s scheme, named after the mythical hero Hercules, will allow the government to guarantee a slice of bad debts that banks sell on to specialist investors. The measure aims to boost efforts to clean up Greece’s still-fragile financial sector, with more than 40% of Greek banks’ overall loans considered “non-performing” (NPL) after a deep financial crisis.

In a statement to Financial Times, George Zavvos, Greece’s deputy finance minister told this plan would enable the country’s banks to remove up to €30bn of non-performing loans from their balance sheets.

As for Margrethe Vestager, the European Commission’s competition chief, said that the proposed guarantee would not constitute state aid, describing it as a market solution to «tackle the stock of NPL weighing on the balance sheets of Greek banks». According to the EC’s responsible, this scheme « is another good example of how member states can help banks clean up their balance sheets without granting aid or distorting competition,».

When the EU created a framework for dealing with stricken financial institutions and beefed up its state aid rules in 2014, it made it harder for its member states to directly take on their banking sector’s bad debts, as Spain was previously able to do in the depths of the financial crisis. 

The Greek solution is modelled closely on a guarantee used in Italy to underpin multibillion-euro bad debt deals from the likes of Monte dei Paschi di Siena, the world’s oldest bank. 

In these securitisation deals, a bank transfers some of its bad debts into a financing vehicle that then sells different slices of risk to fund managers or other specialist buyers. As debt collectors recover money from consumers and businesses that have fallen behind on their payments, the proceeds flow to these investors, with the safest piece getting repaid first and the riskiest last. 

Several Greek non-performing loan securitisation deals have already taken place after reforms in 2017 allowed institutions other than banks to collect bad debts. Pimco, the $1.8tn US asset manager, invested in a €2 billion deal backed by Greek mortgages from Eurobank this year, for example. 

But the new scheme would make the top-ranking slices of these deals even safer, by backing them with a guarantee that the Greek government will step in if they are not covered by the underlying loan repayments. This would make such securitisations even more attractive to investors. 

In Italy, the government-guaranteed slices of these securitisations were often held by the banks themselves on their balance sheet and used as collateral to raise further financing. The riskier pieces of these deals in Italy were often sold to US hedge funds or an Italian bank rescue vehicle called Atlante, which was also carefully constructed to comply with EU state aid rules. 

The Greek finance ministry said its plan would help banks «clean up their balance sheets more quickly and return to their proper role of financing the real economy». 

«It will be the first securitisation of NPL in a country that lacks an investment-grade debt rating» the ministry said. 

Greece is ranked several notches below investment grade by international rating agencies and is not expected to be upgraded to investment status before mid-2020, an adviser to the government said. 

Mr Zavvos said a law permitting the securitisation would be approved by parliament next month. Investor appetite for the securitisation, especially the tranche backed by the state guarantee, «should be strong since this issue will carry a positive interest rate at a time when we are seeing bond yields moving deeper into negative territory», said an Athens-based fund manager.

Original Story: Financial Times | Robert Smith / Karin Hope 
Photo: Photo by Toomas Järvet for FreeImages
Edition: Prime Yield

Brazil Central bank approves 4 credit bureaus for positive credit database

Brazil’s central bank has approved four credit bureaus to act as operators of the country’s positive credit database, or cadastro positivo.

Authorizations have been granted to SPC, Serasa Experian, Boa Vista and Quod. With these approvals, the bureaus can now receive data on borrowers from financial institutions.

The measure was seen as being the last necessary step for the system to go into effect, which was launched on July 9 without key rules for authorities to allow non-financial institutions to have access to financial data.

Without these rules, banks and non-bank companies were unable to share their clients’ payment information. 

Brazil’s monetary council (CMN) had already issued regulations also deemed essential for the operation of the database.

The bureaus are now working on an unified system to standardize the sharing of information. This system is under development and should be ready by the end of the year.

The positive credit database was created in 2011 to be a payment history registry of «good borrowers», comprising information from both individuals and companies.

The main idea was to allow banks and other lenders to offer lower interest rates and faster loan approvals to borrowers with a positive credit history.

However, before the new law was passed, borrowers had to opt in to have their information in the database, which meant there was little information as many borrowers either refused to do so or forgot to join the system.

Furthermore, the system has the potential to expand access to credit, as even workers who do not have a formal job will be able to demonstrate their ability to meet their payment obligations, according to Serasa.

According to a study by the Serasa, the cadastro positive could benefit about 137 million Brazilians, or 88.5% of the adult population, 22.6 million of whom are currently outside the credit market.

The drop in interest rates could reach 74% of over 18s who now have access to credit.

Serasa also estimates that the adoption of the database could add up to 1.3tn reais (US$318bn) to the country’s economy.

Original Story: BNAmericas | News 
Photo: Banco Central do Brasil
Edition: Prime Yield

Heating up on property prices leads to new changes on the Golden Visa regime

With property prices in «major urban centres» already showing clear signs of «overheating», the government is considering throttling back on the issuing of ‘Golden Visas’ for the purchase of houses and apartments.

Says Expresso, economy minister Pedro Siza Vieira has confirmed the executive will be «pondering new alterations of the golden visa rules to counter the excessive investment in property this programme has generated, contributing to further inflating the property market which is already overheated, particularly in large cities», like Lisbon and Porto.

Golden Visas for house and apartment purchases are unlikely to be ruled out altogether, however. One thought is that they will probably only be offered when investors are buying in the interior or areas of low population density, where the «pressure on property prices is less».

Expresso stresses that when the regime was first introduced, in 2012, Portugal’s property market was in the doldrums. The lure of fast-track residency visas has turned everything round, bringing €4.8 billion into the economy, and conceding entry into Europe to nationals from China (4,396), Brazil (829), Turkey (366), South Africa (314) and Russia (283).

But the programme has always been under-fire, for the fact that it essentially opens a door into Europe for anyone with money, with very little research taken into how they have come by it.

Says Expresso, likely changes to the Golden Visa regime could actually see the €500,000 stipulation for property purchases reduced, as long as the transactions satisfy other criteria.

This far however, this is all «on the drawing board». 

Original Story: Portugal Resident |Natasha Donn
Photo: / Miguel Saavedra
Edition: Prime Yield

Haya supports Sareb on implementing its new business model

Haya Real Estate, one of Spain’s market leader in the management of real estate debt and Real Estate Owned (REO) assets, has been selected as the first servicer to support SAREB on the implementation of its new business model under Sareb’s recently announced new Strategic Plan. 

In this context, Haya and Sareb have signed a new servicing agreement to service a portfolio of loans and Real Estate Owned assets amounting to €15 billion assets under management (at Gross Book Value, or GBV) through mid-2022. Haya has been awarded the totality of the auctioned perimeter in a highly competitive tender process. The contract involves no upfront consideration and thus conditions will be those standard in the market for an agreement of this type.

Haya will continue working with Sareb under its existing contract until December 31, 2019 and will support Sareb on the progressive transition to the new business model under a new contract that will be effective from January 1st, 2020. Under this new servicing model, Haya will lead overall commercialization activities and will leverage its in depth understanding of local real estate markets to support Sareb’s new regional strategy. Sareb will assume the direct management of certain positions and will seek to assume certain non-commercial functions as previously anticipated.

Carlos Abad, CEO stated: «We are very proud of having been selected as the first servicer to support SAREB on the implementation of its new business model. We will continue working with the outmost rigor and commitment to help our client reach its business objectives

Original Story: Idealista| Redacción
Photo: Haya Real Estate Site
Edition: Prime Yield

BPI’s earnings in Q3 fell by 52%

Portuguese BPI Bank, owned by the Spanish Caixa Bank, recorded €253.6 million profits in the first nine months of this year represents a decrease of 52% from the €529.1 million achieved in the same period of 2018.

In the presentation of the results, it can be read that «compared to the same period of 2018, the evolution of the consolidated profit (-52%) is strongly influenced by the extraordinary positive impacts registered in September 2018 (+€160 million, mainly gains on the sale of shareholdings) in the activity in Portugal which were not repeated in 2019».

BPI’s also ended the Q3 with 29 fewer workers and 14 fewer branches compared to the same period last year.However, the bank mentions that in September of this year it had «in Portugal 31 ‘premier’ centres, one mobile branch and 34 business centres, making a total of 479 commercial units». In September 2019, the BPI had 4,869 employees, while in September last year it had 4,898.

Original Story: Macau News Agency | Lusa
Photo: Facebook BPI
Edition: Prime Yield

Spanish banks perform more favourably in stress tests

Spanish banks have performed more favorably in this year’s stress tests than last year, Bank of Spain governor Pablo Hernandez de Cos said.

«The results we obtained are, generally speaking, more favorable than last year, since the entities (…) reduced their exposure (to foreclosed assets)» De Cos said.

Spanish lenders are still suffering from the effect of reducing toxic legacy assets left on their balance sheets after the burst of the real estate bubble in 2007, while households are still cutting their own outstanding credit.

Original Story: Reuters| Jesús Aguado
Photo: Banco de España Site
Edition: Prime Yield

CEMG mandated JP Morgan to arrange its 3rd public NPL securitization

Caixa Economica Montepio Geral, the bank holding company, has mandated JP Morgan to arrange its third public NPL securitization, with the Portuguese lender closing in on getting its non-performing exposures (NPE) below the 10% mark.

Gaia Finance ABS has a gross book value of €234.3 million and an unpaid principal balance of €206.6 million. The pool consists of defaulted secured and unsecured loans, with under half of the defaulted pool comprising secured loans backed by residential, commercial and industrial properties in Portugal.

Original Story: Global Capital |Tom Brown
Photo: Site CEMG
Edition: Prime Yield

NPL sales using securitization should become easier, EBA says

Until recently, it has been difficult for European banks to sell their non-performing loans (NPL) using securitizations, and rules should be put in place to make the process more attractive, according to the European Banking Authority (EBA).

Under current rules, potential buyers of bundles loans face «very high capital requirements» for owning the assets, the EU’s banking watchdog said in opinion sent to other policy makers. On top of that, new regulations governing asset-backed securities are causing «compliance challenges» for bad-debt sellers.

The issues result in «higher funding and transaction costs, depress the price of assets, increase the originating institution’s losses and make securitizations an unattractive funding tool», the bloc’s top banking regulator said.

Over the last years, Europe’s banks have faced pressure form EU regulators to reduce their piles of non-performing loans. The total stock fell to €636 billion at the end of June from more than one trillion euros in 2016, according to the EBA. But levels remain elevated in some member states, including Greece, Cyprus, Portugal and Italy.

Until now, lenders have several options when it comes to getting rid of soured assets. They can keep them and absorb the loss, package and offer them at a discount or securitize them, where loans are bundled and sold in tranches with different levels of risk. While the latter is the most costly and complex kind of transaction, it can appeal to a broad range of investors, leading to better prices for sellers, the EBA said.

Recently, Italy and Greece have launched programs with government guarantees to promote the market for securitizations of non-performing loans (NPL). UniCredit SpA is currently preparing to sell €6.06 billion of soured debt through a securitization. Yet. Overall, the method «remains small compared to outright portfolio sales», the EBA said.

However, any rule changes are unlikely to come quickly, as they would need action from the European Commission and may elicit further debate in the block’s parliament and in national governments.

Original Story: Asset Securitization report |Bloomberg News
Photo: Szymon
Edition: Prime Yield