Parliament approves the 18-month extension of the Hercules program

The Greek Parliament voted for the 18-month extension of the Hercules program, designed to reduce the stock of nonperforming loans.

The bill also included amendments to the bankruptcy code and passed on the strength of ruling New Democracy votes alone. All opposition parties rejected it, with the exception of support for single articles.

Arguing in support of the controversial bill, Deputy Finance Ministers George Zavvos and Apostolos Vesyropoulos called the bill a result of “the government’s strategic decision to reduce NPLs to single-digit numbers in order to boost the real economy.”Opposition parties accused the government of boosting the banking system without guaranteeing smaller businesses access to funding, and without protecting vulnerable borrowers from foreclosure auctions.

Original Story: Ekathimerini |Newsroom 
Photo: Photo by Jonte Remos from FreeImages
Edition: Prime Yield

NPL won’t be a brake on credit

The “expectation of continued support for the most affected sectors” by the pandemic together with the end of the moratoria regime leads the Portuguese banks to rule out an increase in credit restrictions. And this time, bad credit won’t be a brake to new financing, concludes the Bank of Portugal (BdP) in one of its latest papers, according to a new from ECO.

“Progress made by the banking system since the last crisis to make it more robust and resilient to shocks will be contributing to a lower impact of NPLs on lending.”, says the BdP.Even with the deadline for the moratoria ending in September, the surveyed banks are calm. According to the Bank of Portugal, the largest national financial institutions “expect the NPL ratio to have practically no impact on lending criteria,” which, according to the survey, have become only slightly more restrictive than before the pandemic.

Original Story: ECO |Paulo Moutinho
Photo: Banco de Portugal website
Edition & Translation: Prime Yield 

Cerberus buys a €500 million REO portfolio from Cajamar

Spanish cooperative bank Cajamar has agreed the sale of a real estate portfolio (REO) composed of 6,000 assets with a total Face Value of about 500 million euros to a subsidiary of Cerberus Capital Management LP. The transaction, which is subject to all necessary corporate and regulatory approvals, is expected to close by the end of 2021.

The portfolio, named “Jaguar”, is composed of 6,000 residential assets, commercial premises, offices, and land. The assets are located mainly in Andalusia, the Valencian Community, Catalonia, the Balearic Islands, and the Region of Murcia. 

This transaction represents the largest NPE transaction in the Spanish market since the outbreak of COVID, and the largest divestment ever completed by Cajamar. 

Alantra acted as financial advisor to Cajamar on the transaction, which represents the fifth project completed for the Spanish bank after Projects Baracoa, Escullos, Galeón, and Tango.

Uría Menendez acted as legal advisor Cajamar, while Clifford Chance was the legal advisor of Cerberus.

Original Story: Cajamar | News
Photo: Cerberus
Edition & Translation
: Prime Yield 

Novo Banco puts the €640 million NPL Harvey Project for sale

Novo Banco has just put an 640 million portfolio of nonperforming loans (NPL) of major debtors up for sale. The institution led by António Ramalho wants to reduce the bad debt ratio from 8% at the end of March to 5% within two years.

With a gross value of 640 million, the Harvey Project is set up of loans in default from the bank’s 20 major debtors, including 8 corporate loans and 12 other loans linked to the real estate sector.

According to the online Eco news this is the new name given from the bank to the credit portfolio that was supposed to be Nata III.

Original Story: Jornal de Negócios | Staff
Photo: Novo Banco website
Edition & Translation: Prime Yield 

Bradesco aims to decarbonize its loan book by 2050

Brazil’s Banco Bradesco has just announced it aims to decarbonize its credit and investment portfolios by 2050, or possibly before, in accordance with scientific forecasts and Paris Agreement climate goals.

In a securities filing, the bank also said it is the first Brazilian bank to join the Net-Zero Banking Alliance, an industry body under the auspices of the United Nations committed to “aligning their lending and investment portfolios with net-zero emissions by 2050.”

Bradesco said this reinforces its commitment to ESG goals and transitioning to a “cleaner, more efficient and resilient economy.”

Original Story: Reuters |Staff 
Photo: Bradesco Linked In
Edition: Prime Yield

Pandemic-created NPLs “will be manageable” says Finance Minister

Any increase in the stock of nonperforming loans create by the pandemic crisis is expected to be “manageable” for the country’s four systemic banks, Deputy Finance Minister Giorgos Zavvos said.

Speaking in Parliament, Zavvos said that the European Central Bank and the Single Supervisory Mechanism have not offered any evidence of an imminent explosion of NPLs because of the pandemic, adding that “the evidence we have so far from the four systemic banks showed that the stock of nonperforming loans from the pandemic will not exceed 4-5 billion euros. In other words, it will be a sum that is completely manageable under the Hercules program which is implemented by the government and operates with the confidence of international investors.”

The Hercules program, designed to reduce the stock of NPLs, has tangible results, the Greek minister said, adding that it helped in the reduction of NPLs by 32 billion euros during the initial period of its implementation “without costing Greek taxpayers even a single euro.”

Original Story: Ekathimerini | Newsroom 
Photo: Photo by Takis Kolokotronis from FreeImages
Edition: Prime Yield

Santander sells 600 million NPL portfolio to Marathon

Banco Santander agreed to sell a nonperforming loan (NPL) portfolio to Marathon Asset Management LP as part of its strategy to clean its balance sheet, according to a news advanced in first-hand by the Spanish newspaper El Confidencial.

According to a source familiar to the transactions quoted by the newspaper, the Spanish bank has disposed of 600 million euros of NPL, which the U.S.-based fund bought for 100 million euros. This is the first time Santander has offloaded default loans since the coronavirus pandemic began.

This portfolio is largely made up of default loans from small and medium-sized companies, particularly hotel firms.

Original Story: Market Watch | Carlos Lopez Perea 
Photo: Photo by Jason Hochman from FreeImages
Edition & Translation:
Prime Yield

Altamira Portugal expects 1 billion in new NPL until the end of the year

The new CEO of Altamira Portugal, Isabel Teixeira, is expecting a significant increase in new nonperforming loans (NPL) coming to the market within the news few months, she said in an interview to Económico.

Isabel Teixeira admits that by the end of the year the amount of NPL coming onto the market will reach the global value of 1 billion euros. “There are portfolios entering the market coming from practically all banks, and whose tenders are expected to take place by the end of the year,” the manager acknowledged.

In the same occasion, Altamira’s responsible in charge of the Portuguese market also spoke of the possibility of the state seeing the guarantees provided in the Covid lines executed and therefore being able to become a seller of NPLs, alongside the banks.

Original Story: Jornal Económico |Maria Teixeira Alves 
Photo: Altamira Linked In
Edition & Translation: Prime Yield

Brazilian banks’ profitability falls in 2020, but recovery is expected in 2021

Brazilian banks saw profitability fall last year for the first time since the 2015-2016 recession, according to the central bank annual report on the banking system, as the COVID-19 pandemic forced institutions to increase provisions.

In December 2020, the banking system’s aggregate return on equity was 11.5%, the lowest in the central bank’s series, although the 2021 outlook is improving despite ongoing uncertainty surrounding the pandemic, it said.

“The fall in profitability was widespread, affecting banks of different types of control, size and activity,” the central bank said in its annual report.

“Bolstering provisions in 2020 reduces the need for significant new provisions, and the rebound in economic activity will support growth, credit quality, and demand for banking services,” it added.

The report also highlighted reduced concentration of the banking system, as the market share of state-owned institutions such as Banco do Brasil, Caixa Economica Federal and the BNDES national development bank fell.

The five largest banks – Itau, Bradesco, Santander, Banco do Brasil and Caixa Economica Federal – accounted for 77.6% of total assets in December 2020, down from 81% a year earlier, the central bank said.

The concentration of total deposits in these institutions dropped to 79.1% from 83.4% in December 2019, it added.

Original Story: Reuters|  Reuters Staff 
Photo: Photo by LotusHead from FreeImages
Prime Yield

Greek banks on right path to NPL reduction

The Bank of Greece (BoG) considers it possible that the rate of nonperforming loans (NPL) in the country will drop below 10% by the end of 2022, despite the uncertainties and the new bad loans created as a result of the pandemic.

Therefore, the central bank noted in its latest monetary policy report, “banks ought to review the sufficiency of their provisions on credit risk, particularly the repayment capacity of borrowers hurt by the pandemic, given that the state measures distort the real picture.”

The BoG warns that the NPL reduction strategy will increase the share of funds corresponding to deferred tax credits. It notes that in the year’s first quarter, both the Common Equity Tier 1 (CET1) index and the capital adequacy index posted a slight reduction from 2020, but remained at satisfactory levels (13.6% and 15.6% respectively). Still, “they are now lagging the European average.”

Amid the adverse impact on the capital adequacy indexes of banks from the loan securitizations, the Bank of Greece considers particularly positive the capital strengthening initiatives of banks, such as the 1.4-billion-euro share capital increase and the €600 million bond issue by Piraeus Bank, and the €500 million bond issue plus the €800 million share capital increase by Alpha Bank this week.

On the other hand, the central bank finds there are concerns about the “relatively weak capital adequacy figures of certain non-systemic lenders,” implying that some cooperative banks had better resort to share capital increases.

At end-March 2021 the NPL stockpile within Greece’s banking sector amounted to 47.3 billion euros, with about 58% of that concerning business loans, 28% mortgages and the rest consumer loans. Approximately half of the sum has to do with loan contracts banks have already called, followed by loan deals with uncertain collection and loans delayed by more than 90 days that have not yet been called. The NPL ratio of all loans remained high at end-March at 30.3%, almost 12 times higher than the eurozone average.

The activation of the new bankruptcy code that will contribute, as the BoG notes, to the improvement of banks’ assets and generally the strengthening of economic activity, is also considered a positive by the central bank.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Bank of Greece website
Edition: Prime Yield

Spain’s banks lay groundwork for post-COVID consumer spending boom

Spain’s banks, their margins slashed during the pandemic, are betting on a high-yield route back to profitability through consumer loans – by encouraging lockdown-weary customers to spend big on cars, holidays and home improvements.

Consumer lending on average makes up just 7% of those banks’ loan books, though yields on that business are generally several times higher than on mortgages.

It plummeted as COVID-19 peaked and, with the risk of defaults on loans taken out before the pandemic not yet eliminated, some in the industry caution that it may be too early to push millions of Spaniards into taking on more debt.

But, as they struggle to earn money elsewhere in a low-interest environment, several banks are targeting consumer lending as a growth area.

Caixabank, Spain’s biggest domestic lender by assets, began offering six million of its customers pre-approved credit in May, and Santander has made similar offers worth 90 billion euros.

Marketed as “MyDreams”, Caixabank’s programme is designed for purchases of electronics, household appliances or refurbishment projects and carries yields of up to 11.5%. The bank expects it to be one of its main earnings drivers in 2021.

“If consumption is reactivated, consumer credit will be too, and that can be a source of improved profitability,” said Eduardo Areilza, senior director at consultancy Alvarez & Marsal.

BBVA meanwhile, expects a “forced build-up” of pandemic savings, EU funds and progress with vaccinations to increase car purchase by 8% in 2021 and by 24% in 2022 and, for that purpose, offers eight-year loans of up to 75,000 euros at up to 6.9% on its web page.

By comparison, average mortgage returns are around 1.5%, according to Bank of Spain data.

“Car purchases in Spain are typically financed and banks will grab part of that pie,” a retail banker said.

Analysts at Credit Suisse and Jefferies see signs that consumer loan activity is bottoming out and expect a resurgence.

“Consumer lending has been typically under pressure during COVID (…) but we would expect momentum to pick up through the rest of the year as lockdowns ease,” Jefferies said.

A Spanish lender’s retail executive told Reuters that the worst of the pandemic seemed to be over and “in this context we are definitely going to be active in consumer loans.”


There are already signs of such activity.

At mid-sized lender Liberbank, new consumer lending rose 7.9% year on year in the first quarter, nearing pre-pandemic levels. In March, month on month, it rose 25% at Santander and 19% at Sabadell.

Jefferies expects the pickup to boost Spanish banks’ profitability, which in 2020 turned negative.

Lenders’ return on equity (ROE) – a measure of profitability – fell to -3.6% in the fourth quarter, below the average of 1.9% of euro zone banks, according to ECB data.

A less stable credit environment was a factor in that drop, with Spanish banks’ bad loan provisions rising to 8.7 billion euros in 2020 as a whole.

In late April, the country’s central bank urged lenders to set aside even more cash to cope with a potential rise in bad loans.

In consumer lending, the bad loans rate rose to 5.52% in the first quarter from 5.13% in the fourth.

That’s still a far cry from the peak of 8.2% that, according to Reuters calculations, it reached in June 2009, at the height of the financial crisis, let alone the 13.6% peak for overall loans hit in the crisis’ aftermath in December 2013.

Original Story: Reuters | Jesús Aguado
Photo: Photo by Xexo Xeperti from FreeImages
Edition: Prime Yield