Abolishment of the Hercules scheme is premature, states DBRS Morningstar

It is premature to abolish an effective tool like the Hercules asset protection scheme, which expires in October 2022, given the challenges posed to Greek systemic banks by the spike in inflation and the Russian invasion of Ukraine, Canada-based rating agency DBRS Morningstar notes.

“There is continuing uncertainty about the speed and volume of possible future deterioration of assets in the bank balance sheets,” the firm said.

It explained that inflationary pressures, rising energy prices as well as possible supply bottlenecks will put pressure on consumers and businesses.

The length of this price pressure and how it is offset by consumer protection and business support programs will play an important role in setting the trend for new nonperforming loans and their performance, it argued.

Original Story:  Ekatemerini | Newsroom 
Photo: Photo by Jonte Ramos in FreeImages
: Prime Yield

DoValue launches SME business unit in Spain

One of the main operators in Southern Europe in the field of credit and real estate investment management for banks and creditors, the DoValue group has announced  its subsidiary Altamira Asset Management has formally set up a business unit dedicated to the management of Non-performing Exposures (NPE) related to Small and Medium Enterprises (SME) in Spain and “that it is significantly investing in its development”.

The SME business unit employs about 40 professionals and is currently managing approximately €3 billion of Gross Book Value (GBV), “a level which is expected to grow over the next few quarters”, the group informs. Whilst the current GBV is mainly composed of Non-performing Loans (NPL), as part of the development of the SME business unit is to further expand also in the Unlikely to Pay (UTP) and Early Arrears segments.

In a press-release, DoValue adds that “the key strengths of the SME business unit are its broad territorial presence (which mirrors the granularity of the SME segment), the fact that it is fully integrated with the doValue Group from a technological and IT systems point of view and that it can leverage on the Group best in class practices already well developed in Italy and in Greece”.

Original Story:  Market Screener |PR
Photo: Do Value website
Edition: Prime Yield 

Montepio expects losses of up to €100 million from selling Finibanco Angola

After the deal with Mário Palhares failed, Banco Montepio has already found a buyer for its Angolan bank, in an operation that could represent losses of up to €100 million.

The Associação Mutualista Montepio Geral (AMMG) bank agreed to sell Finibanco Angola to a Nigerian bank, Access Bank, but the operation is not yet closed, according to information gathered by ECO. The bank headed by Pedro Leitão is still doing its sums for the operation. And they are not exactly the best. It is estimated that the sale could represent losses of between €80 million and €100 million, two sources told ECO.

The impact of the transaction (if it goes ahead) is not insignificant for a financial institution that has posted poor results in recent years (6.6 million in 2021 and 11 million in the first quarter of this year) and where the financial capacity has to be managed carefully. 

Officially, the bank makes no comments on this process. ECO knows that there is still no final decision regarding the sale, which may not materialise. 

The buyers have already been presented to the National Bank of Angola (BNA), the Angolan banking supervisor, which has to allow the sale. Access Bank, which has been in existence for around 30 years, is headquartered in Lagos, the Nigerian capital and is present in ten other markets, including the United Kingdom, South Africa and Mozambique. 

In Lisbon, the Bank of Portugal is also closely monitoring this dossier, which it wants to see resolved so that the next board can focus on the core business of a bank which, after restructuring over the last two years, continues to make its way towards profitability. 

Finibanco Angola joined the Montepio group in 2010, when Finibanco was acquired for €250 million

Original Story: ECO News
Photo: Montepio website
Edition: Prime Yield

Banco do Brasil has already disbursed R$ 1.6 million in credit through WhatsApp

There are more than 23 million attendances in the last 90 days in BB’s virtual assistants

Banco do Brasil (BB) reported that more than R$ 1.6 million in personal credit has already been contracted through WhatsApp, with a hiring journey entirely within the conversation with the virtual assistant of BB.

Banco do Brasil is the first to offer the solution, which was extended to the entire public from June 2nd. With the expansion of products and services on the social network, now Banco do Brasil clients can take out personal loans directly through the messenger.

To simulate, check the conditions – such as maturity date, amount of installments, contracting date – and contract the operation, the customer just needs to start a conversation with the number 61 4004-0001.

The solution is not exclusive to new contracts. Customers who already have a loan contracted can also follow the statement of their operations by WhatsApp. By the end of this year, the offer of personal credit products will be expanded to include consigned credit, income tax refund anticipation credit, 13th salary credit and vehicle credit.

The credit offer meets a demand from customers. According to BB, more than 23 million calls were made in the last 90 days on the bank’s virtual assistants.

Original Story: Correio Braziliense | Fernanda Strickland
Edition & Translation: Prime Yield

National Bank of Greece grows profit on higher fee and trading income

National Bank (NBG), Greece’s second-largest lender by market value, reported higher net profit in January-to-March compared with last year’s fourth quarter on the back of higher trading and commission income.

NBG, 40% owned by the country’s HFSF bank rescue fund, said net earnings from continued operations reached  €208 million from  €100 million in the fourth quarter of 2021, beating analyst forecasts.

The bank had earned €583 million in last year’s first quarter.

Provisions for impaired loans dropped 27% year-on-year to  €56 million in the first quarter and were slightly down quarter-on-quarter as well.

On the asset quality front, NBG’s stock of so-called non-performing exposures (NPEs) continued to fall. Its NPE ratio dropped to 6.7% of its loan book from 7.0% at the end of December.

Despite uncertainty and inflationary pressures, the payment performance of clients receiving state sponsored support was reassuring, NBG said, with default rates in low single digits.

The bank said there were no signs of delinquencies due to the recent surge in Greek inflation, which hit 10.2% in April, a 28-year high.

“Looking forward, investment growth, a very strong start for the tourism season combined with fiscal support measures in energy cost relief will support Greece’s recovery,” said Chief Executive Paul Mylonas.

The group’s commission income grew 25% year-on-year, supported by increasing retail and corporate loan origination, with card and intermediation fees also driving the upswing.

Original Story: Hellenic Shipping News | Reuters
Photo: Photo by Michalis Famelis in Wikimedia Commons
Edition: Prime Yield

Sabadell seeks a buyer for a €1 billion NPL portfolio

Banco Sabadell is looking for a candidate to buy a further portfolio of non-performing loans (NPLs) with a total value of 1,000 million euros, market sources have confirmed to Europa Press.

It would be a portfolio made up of equal parts of failed consumer loans and doubtful loans granted to companies, although it was contracted prior to the Covid-19 pandemic.

The bank would have put this portfolio up for sale in April, although it would be mid-June when the entity would begin to receive offers for it.

According to ‘El Confidencial’, which has advanced the news, the bank is also reorganising the management of unpaid loans by uniting the areas of recoveries and construction of doubtful portfolios under the same management.

Original Story:  Idealista |Europa Press 
Photo: Sabadell website
Edition: Prime Yield

Novobanco sells logistic portfolio with a positive impact of €62 million

Novobanco has sold a portfolio of logistics assets in Portugal for €208 million and says the deal will have a positive impact of €62 million on this year’s accounts, as well as a 35 basis point improvement in the capital ratio. 

Without giving figures on the deal, the bank revealed an agreement for the sale of a real estate portfolio comprising predominantly logistics assets, held by real estate funds NB Património and NB Logística, both managed by GNB Real Estate, and in which the banking institution held, on average, a stake of around 75%.

Later, the Portuguese lender made a new clarification to the market, informing the price of the sale after a competitive bid process and the impact it will have on the bank’s income statement if the transaction is completed. It did not indicate who the buyer would be.

In the previous statement, the bank spoke of the success of the operation, which “reflects the positive moment of the market in this real estate segment, with a significant reduction in yield over the last 12 months and consequent increase in price, given the higher demand for logistics assets post-pandemic.

This deal will give an even bigger boost to Novobanco’s profits, which doubled in the first quarter of the year to €142.7 million. 

Since it was sold to the Lone Star fund, the bank has been undergoing deep restructuring and making portfolio sales of troubled and deemed non-core assets. Many of these operations generated million-dollar losses for the bank, forcing the Resolution Fund to inject money (more than €3 billion) into the institution to offset the losses and restore the capital balance.

Original Story:  ECO News | News 
Photo: Novo Banco website
Edition & Translation: Prime Yield

Credit card interest rises for fifth month in a row

A survey by the National Association of Finance, Administration and Accounting Executives shows that the annual rate reaches 371.25%.

Credit card interest rates in Brazil rose for the fifth month in a row, standing at 13.79% in May. The 0.8% increase applied to the rate last month is the highest since June 2018. The rate reaches 371.25% per year, according to data from the National Association of Finance, Administration and Accounting Executives (ANEFAC).

The rise also occurred with the overdraft check, which had annual interest of 150.14%, recorded last month. ANEFAC warns of an even more pessimistic scenario in the coming months.

The researchers responsible for the study predict the maintenance of high costs for short-term credit in the face of an economic environment of greater risk, combined with an increase in the number of defaulters and the Selic rate.

For the executive director of Studies and Economic Research of the association, Miguel José Ribeiro de Oliveira, care must be taken not to acquire debt at this time. “High inflation corrupting family income, high interest rates making credit more difficult and expensive, more selective banks and extremely high unemployment.

Original Story: CNN Brasil | Rayane Rocha / Thayana Araújo 
Photo: Photo by Wundelman in FreeImages
Translation & Edition: Prime Yield

Alpha Bank records after-tax profits of €125.4 million in Q1

Αlpha Bank announced after-tax profits of 125.4 million euros in the first quarter of 2022, with adjusted after-tax profits at €134 million.

Vassilis Psaltis, CEO of the bank, commenting on the first-quarter results, said they confirmed Alpha Bank’s strong dynamism following the completion of a restructuring plan.

He noted that Alpha was on the way to achieving its goals for 2022 and predicted that the NPE ratio will drop into the single digits in the second half of the year.

Psaltis said credit expansion totaled €1 billion, based on new loan disbursements of €2.4 billion in the first three months.

Alpha said commission revenue surpassed €100 million in the first quarter.

Original Story: Ekatemerini | News| 
Alpha Bank website
Prime Yield

Consumer credit default hits its highest level since 2016

Doubtful debts of credit institutions increase and are close to €3 billion. Banks suffer the first increase in defaults in this way.

 The possibility of non-performing loans (NPLs) spiralling out of control is one of the biggest threats in the financial sector since the coronavirus began. For now, it is contained in banking, but there is already a path of increase in consumer credit, where the default has reached 7% – the highest level since 2016, according to the latest release from the Bank of Spain.

The report, which covers the period up to March, demonstrates that NPL in credit financial institutions rose by 5.5% monthly, to €2.982 billion, against a total credit stock of €42.096 billion. This is therefore an NPL ratio of 7.08%, up from 6.88% in February, and the highest level since May 2016.

CBEs account for a large part of consumer credit, although not all of it, but the segment’s NPLs figure serves as an approximation of the trend. These establishments are companies with their own legal status that are part of banking groups, or in some cases are independent firms, which are dedicated to granting personal loans.

However, the perimeter of consumer credit is larger. While in the banking sector as a whole it remains contained, with €51.485 billion in doubtful loans and an NPL ratio of 4.24% in March, lower than in February, there has been an upturn in consumer credit. Non-payments increased in December, during the Christmas sales campaign, marred by the omicron. That month it rose from 6.56% to 6.89%, and now it has risen again. 

Before the pandemic started, in February 2020, the default rate was 5.81%. Thus, there is an increase of more than one percentage point. You have to go all the way back to May 2016 to find a higher record in the historical series, although it is still far from the historical highs of over 11% in 2014.

These consumer loans are not secured by mortgages or other collateral, and recoveries are more difficult. Banks often bundle defaults into portfolios and sell them to opportunistic funds at discounts of up to 95%. In this sense, there is an appetite for funds to buy this year, after two years with less activity.

Experts were already anticipating that the first upturn in defaults should come in consumer credit. The question is when we will see the increase in companies, and whether it will reach mortgages, for which the economy would have to continue to deteriorate in the midst of a change in the monetary policy cycle with interest rate rises. 

The unknown is in the business sector, where there has been an increase in debt with the ICO loans that kept many companies afloat. Some healthy and others that were no longer sustainable and could become zombie companies. Default is almost frozen in companies with the bankruptcy moratorium, which expires on 30 June, but for which it is not yet known whether there will be another extension. The Bank of Spain estimates that 20% of ICO loans are under special surveillance by banks.

Original Story:El Confidencial |Oscar Gimenez
Photo: Photo by Pablo Rodríguez from FreeImages
Edition and translation: Prime Yield

Crédito Agricola’s profits cut for half in Q1

The Crédito Agrícola group added a first-quarter profit of €35.7 million, which compares with earnings of €72.5 million in the same period last year.

Crédito Agrícola posted a net profit of €35.7 million in the first quarter of this year, 50.7% less than in the same period last year, the group led by Licínio Pina said in a statement.

Net interest income fell 12.3% to €75.3 million, but the bank’s net commissions rose 23.3% to €33.2 million euros, the financial institution said.

Operating income ultimately fell 27% year-on-year to €132.2 million.

According to Crédito Agrícola, the fall in first quarter profit was influenced by the results, non-recurring, obtained in the first quarter of 2021, related to net gains from financial operations, amounting to €51.3 million, and retroactive interest, relating to 2020, received under the ECB – European Central Bank financing programme.

Included in the result of the Crédito Agrícola group are contributions from the insurance business in the amounts of €2.7 million in the case of CA Vida and €3.4 million via CA Seguros.

In the first quarter the loans and advances to customers portfolio grew 3.5%, to €11.5 billion.

The NPL (non-performing loans) ratio improved from 7.2% at the end of 2021 to 6.7% at the end of March.

“At the end of the first quarter of 2022, the Crédito Agrícola Group’s solidity and liquidity levels remain above the recommended minimum levels,” indicates the group, which reports CET1 and total equity ratios of 18.8% (including net income for the 2021 financial year), a leverage ratio of 8.2%, a liquidity coverage ratio (LCR) of 429% and a stable funding ratio (NSFR) of 155.2%.

Original Story:  Expresso | Miguel Prado 
Photo: Crédito Agricola Website
Edition & Translation: Prime Yield

Brazil raises key rate by 50 points, signals more to come

Brazil’s central bank raised its key interest rate by half a percentage point and signaled a hike of equal or smaller magnitude for its next meeting, as policy makers juggle above-target inflation expectations and waning economic growth.

The bank’s board lifted the Selic to 13.25% on June 15th as expected by 39 of 41 analysts in a Bloomberg survey. The other two saw a larger boost of 75 basis points. Policy makers have added 11.25 percentage points to rates since March 2021.

“For its next meeting, the Committee foresees a new adjustment, of the same or lower magnitude,” policy makers said in a statement accompanying their decision.  “The Committee stresses that the growing uncertainty of the current scenario, coupled with the advanced stage of the current monetary policy cycle, and its impacts yet to be observed, require additional caution in its actions.” 

The central bank, led by Roberto Campos Neto, is grappling with more expensive food and energy, which have kept annual inflation above 10% since September. While economic growth remains subdued and price increases eased in May, forecasts for the next few years are still above target. Policy makers must also weigh congressional proposals that would lower fuel costs this year but add to inflationary pressures in 2023.

“The overall outlook remains difficult,” Lucas Vilela, an economist at Credit Suisse, said before the decision. Inflation expectations will likely plateau in coming months as policy makers gradually shift their focus to 2024, he said.

Brazil’s rate hike came hours after the Federal Reserve raised its key rate by 75 basis points — the biggest increase since 1994 — and Chair Jerome Powell said officials could move by that much again next month or deliver a smaller half-point boost. In Latin America, Mexico’s central bank is mulling a record rate increase of 75 basis points at its June 23 policy meeting.

Inflation is one of President Jair Bolsonaro’s main headaches as he runs for re-election in October, with Brazilians increasingly blaming him for spikes in the cost of living. In a bid to cushion the blow, his government is asking supermarkets to hold down prices, besides pushing legislation that would reduce fuel taxes. 

Annual inflation stood at 11.73% in May, well above targets of 3.5% for this year and 3.25% for 2023.

Policy makers have expressed concern that higher rates will be a drag on growth. Brazil’s gross domestic product expanded less than expected in the first quarter in what was likely the high-water mark for activity this year.

Outstanding consumer debt remains at record levels with analysts warning about rising default rates. Unemployment is sliding but informality is high and wage increases have failed to make up for lost purchasing power.

Original Story: Bloomberg News | Maria Eloisa Capurro
Photo: Photo by Svilen Milev in FreeImages
Translation & Edition: Prime Yield

A new wave of NPL’s on the way

After a pile of new nonperforming loans (NPLs) worth almost €5 billion emerged in 2021, Bank of Greece increased its concerns regarding the creation of new generation of bad loans this year after the outbreak of the geopolitical and energy crisis.

Addressing the 4th NPL Summit by ethosEvents, Bank of Greece Deputy Governor Christina Papaconstantinou noted that the first signs show that “we have new flows of NPLs and an increase in arranged debts,” This warning came ahead of the definitive withdrawal of the pandemic support measures for borrowers within 2022.

“This impact cannot be assessed with precision yet, but it does constitute a cause for concern, especially if the geopolitical crisis lasts for long or grows bigger,” she stated, noting that “no complacency is allowed.”

A similar concern emerged at the same conference from the chief executive officer of doValue Greece and president of the association of servicers, Tasos Panousis: He noted that “the crisis is calling on us to act before developments overcome us and we see new defaults.” He then stressed that “the companies managing loans worth €123 billion will have to double their efforts so as not to see the securitization plans derailed.”

The first worrying signs came in 2021, when, despite the overall reduction in the stock of NPLs in banks’ portfolios, new bad loans amounting to €4.2 billion were created, an amount that grows to €5.3 billion when interest is included, according to the central bank.

As the Bank of Greece notes, “during 2021 the loans shifting from performing to nonperforming were greater by €823 million than those moving the opposite way.”

At the same time a significant deterioration has also been recorded in some other key indexes in the industry, such as the index of uncertain collection, which reached 35.5% of all loans at end-2021, up from 29.4% at end-2020, and the index of loans delayed for more than 90 days, which climbed to 31.1% from 23.3% respectively.

Original Story:  Ekatemerini | Evgenia Tzortzi
Photo: Photo by Magda S in FreeImages
Edition: Prime Yield  

Special surveillance loans grow at 14%

The combined weight of NPL accounts for 24% of those granted to the sectors most affected by the pandemic.

The Bank of Spain’s Financial Stability Report confirms that loans under special surveillance have grown by 14% at the end of 2021 compared to 2020. “The ratio of loans under special surveillance continued to increase, particularly in the sectors most affected by the pandemic, where the nonperforming (NPL) loans ratio also increased slightly,” explains the regulator’s spring report.

A credit is classified as NPL when it accumulates defaults of more than three months or for an amount exceeding 25% of the debt. Its predecessor is credit under special surveillance: these are those in which, even though no default event has occurred, a significant increase in credit risk has been observed since the time of granting. According to the Financial Stability Report, the combined weight of NPL and loans under special surveillance accounts for 24% of the credit granted to the sectors most affected by the pandemic, 18% in the moderately affected sectors and 15% in the remaining sectors. 

Original Story: Diário Siglo XXI | Press
Photo: Photo by Victor Iglesias in FreeImages
Edition: Prime Yield

NPL from households and NFC fall as credit concession is on the rise

According to the latest data from Bank of Portugal, at the end of the 1st quarter of 2022, the balance of the volume of loans granted to non-financial companies (NFCs) was 2.1 billion euros, 98.6 million euros more than at the end of March 2021 and 21.7 million euros more than in December 2021. And, now the Regional Directorate of Statistics (DREM) from Madeira released its analysis of these figures, highlighting them as another indicator of market confidence among consumers.

This is because “the overdue credit ratio for this type of company increased 0.4 percentage points (p.p.) in relation to the end of 2021 at 2.4% at the end of the reference period”, the directorate stresses,  but “compared with the same quarter of the previous year, there was a reduction of 1.2 p.p.”,. “On a national level, the overdue loans ratio fell 0.1 p.p. in comparison with the previous quarter and 1.1 p.p. in homologous terms, not exceeding 2.2% at the end of the first quarter of 2022”.

It should be noted that “the amount of non-performing loans (NPL) among non-financial companies, headquartered in the Region [Madeira], stood, in the period in question, at 49.0 million euros (+8.1 million euros than last December and -22.3 million euros compared to March of the previous year)”, which can still be seen as a warning sign to be taken into account.

In the case of debtors in the NFC sector (companies) with overdue loans, at the end of March 2022, the percentage “was 14.4%, and this indicator has remained below the national average (15.0% in the same period) since July 2020,” says the DREM.

“In the sector of households and Non-Profit Institutions Serving Households (NPISHs) there was a year-on-year increase of € 62.6 million in the balance of loans granted, bringing it to € 3.2 billion at the end of the 1st quarter of 2022,” it reveals. “When the balance is compared with the previous quarter, there is also an increase of around €35.5 million. If the analysis is more detailed, it can be seen that 67.5% of that balance referred to the housing segment and the remaining 32.5%, to consumption and other purposes”, the document explains.

With regard to non-performing loans (NPL) “in the housing segment, these did not exceed €11.9 million euros, representing a NPL ratio of 0.5%, thus maintaining the historical minimum for the available series, which began in March 2009. This percentage is slightly above the national value (0.4%). Between March 2021 and March 2022, the ratio of overdue housing loans ratio was reduced by 0.3 p.p. in the Region” of Madeira, the DREM guarantees.

To attest to this good wave of banking, “the number of debtors of the institutional sector households and NPISHs grew in relation to the previous quarter to 100.100, and at the end of the 1st quarter of 2022, there were around 44,400 debtors with mortgages and 83,500 with consumer credit and other purposes”, almost double.

Original Story:  Diário de Notícias Madeira  | Francisco José Cardoso 
Photo: Photo by Svilen Milev in FreeImages
Edition & Translation: Prime Yield

UBS: Brazil’s banks may be ahead in credit cycle in Latin America

Latin American peers have recently shown worsening defaults; in Brazil the trend has been going on since 2020

Brazilian banks may be a few steps ahead of their Latin American peers in the credit cycle, assesses UBS BB. According to analysts Thiago Batista and Olavo Arthuzo, institutions in Mexico and the Andean countries have only started to show a worsening in defaults in recent quarters, while in Brazil this trend began in late 2020.

“This trend (of worsening) is clearer when we assess the quarterly data, whose numbers for Brazilian banks seem to potentially indicate that they are ahead of their regional peers in the credit cycle,” they said in a report sent to clients.

UBS calculated the average default rate for the largest banks it covers in Brazil, Mexico and Chile and Colombia. The Andean countries have the highest rate, at 3.1%, but the Brazilians, who come soon after at 2.9%, have been seeing an increase for longer. From the country, Itaú Unibanco, Bradesco and Santander Brasil were included. In Mexican banks, the average default rate is 1.8%.

The institution points out that throughout 2020 the large local banks considerably increased their coverage rates against possible defaults, but the default data fell. “Aside from differences in methodology between the banks we cover, it is remarkable how Brazilian retail banks had an artificial improvement in defaults in 2020″, UBS underlines.

That improvement, the house points out, came with government credit programs, bank-led renegotiations and other initiatives, most of which have now closed.

A worsening in defaults is expected by UBS analysts for Latin America as a whole. The bank predicts a gradual deterioration as a combination of riskier credit portfolios and high inflation erodes purchasing power and income.

According to the bank, Mexican banks have been more conservative in setting aside provisions over the last ten years. Brazilian banks should be the most exposed to risk, given that in the first quarter of this year 41% of their portfolios were loans to individuals, the highest volume in a decade. Colombian and Chilean banks, by this metric, have the least risky portfolios.

Original Story: E.Investidor Estadão | Matheus Piovesana 
Photo by Cesar Fermino in
Translation & Edition: Prime Yield