Bradesco quarterly profit dips, outlook on loan provisions worsens

Brazilian lender Banco Bradesco SA reported a 22.8% drop in third-quarter recurring net profit and raised its forecast for set-aside funds that may be needed to cover bad loans.

Bradesco’s recurring net profit totaled 5.22 billion reais, coming in below a Refinitiv consensus estimate of 6.76 billion reais.

The lender also raised its expectation for the amount of money it will set aside for non-performing loans this year. It now expects to hold provisions in the range of 25.5-27.5 billion reais, as high interest rates have caused a deterioration in asset quality.

During the July to September period, Bradesco set aside 7.27 billion reais, more than double the amount compared to a year earlier.

Brazil’s second-largest private lender said the increase in provisions reflects a higher turnover in more profitable and riskier operations.

In September, Brazil’s central bank paused an aggressive monetary tightening cycle, leaving its key Selic interest rate at 13.75% after 12 consecutive hikes. The central bank’s rate-setting committee also left its benchmark rate unchanged in October.

Bradesco said its 90-day loan default ratio was 3.9% at the end of September, a 1.3 percentage point growth from a year earlier and 0.4 points above the second quarter ratio.

“We observed the delinquency concentrated in individuals, in the lines of mass market loans, and in companies, substantially in micro and small-sized firms,” said the lender.

Its consolidated loan book grew 13.6% to 878.57 billion reais, mainly driven by credit card transactions, personal and payroll-deductible loans.

Original story: Reuters | Peter Frontini
Photo: Bradesco Linked In
Edition: Prime Yield

Banks aims to sell another 7.5 billion in ‘toxic assets’ this year

Banks are looking to get €7.5 billion in debt with defaults off their balance sheets against the clock. There are 16 portfolios of non-performing loans (NPL) for sale on the market, with collateral and without guarantees, the divestment of which would bring to €15.3 billion the problematic assets placed throughout the year if they are awarded, as they hope, before the end of 2022.

To date, some 23 transactions with a nominal value of €7.8 billion have been closed and those that remain open were launched weeks or even months ago, with the expectation of awarding them or closing the agreement for the transfer mostly during the current month, according to market estimates.

The process of “cleaning up” balance sheets picked up speed at the start of the year, compared to the €5-6 billion transacted in each of the financial years 2020 and 2021 due to the return to normality post-Covid, without reaching, in any case, the intensity expected by market operators.

Not seeing the expected boom

The reason is that delinquency remains contained (it stood at 3.86% in August) against the conviction that it would emerge significantly after the lifting of the moratoriums on corporate and household loans and the default on the payment of corporate financing guaranteed by the ICO, activated to help customers cope with the hardship of the pandemic.

Banking forecasts delay the upturn to the second quarter of 2023 and it is presumed manageable unless the economic recession worsens due to the rise in interest rates that the European Central Bank (ECB) finally applies to curb inflation, which is galloping at 10.7% in the eurozone.

Even so, the market is observing “fresher” portfolios or portfolios with less aged doubtful loans, which in the eyes of the experts consulted could reflect the banks’ interest in getting rid of unproductive exposures sooner, and smaller portfolios or portfolios with more unique assets have been presented.

Among the portfolios for sale are some six unsecured NPL operations (consumer credit) with a total nominal value of around €1.9 billion, where BBVA’s “Operación Neila” stands out. Sareb’s “Gas Project” stands out among half a dozen other secured and unsecured portfolios, and some real estate assets (REO) with a total face value of €5 billion. The bad bank’s offer alone includes real estate loans worth €1.262 billion and with 11,000 residential assets as collateral.

In addition, there are three other portfolios of real estate assets worth 350 million, where Unicaja’s “Proyecto Leónidas” stands out. Its value, which exceeds 200 million, represents 10% of the foreclosed assets on the financial institution’s balance sheet.

The largest transactions

Among the operations closed during the year were Sabadell, with the sale to Hoist of a mortgage portfolio with a nominal value of 300 million in the “Cora Project”, and another 40,000 unsecured loans with a nominal value of 832 million to the Zolva fund; and CaixaBank, which transferred €1.100 billion in consumer and SME loans in the “Ordesa Project” to the EOS fund, Axactor and Kruk; and another 750 million in the “Yellowstone Project” to Cerberus, among other operations.

Unicaja disposed of Liberbank’s impaired loans with a nominal value of 307 million in “Project Vector” to Axactor; and Kutxabank transferred 240 million in mortgages with defaults in “Project Puppy” to the EOS fund and Deutsche Bank. Santander, WiZink, ING and Cetelem have been other institutions to put non-performing assets up for sale, where there are also transactions between investors seeking, in some cases, liquidity for other positions once they have extracted the profitability or a margin with their initial recovery.

Although the sector has not yet seen signs of deterioration, it expects it to occur and the Bank of Spain is not missing an opportunity to ask institutions to be prudent in their provisions and capital strategies. Despite the fact that institutions have disposed of damaged assets with a nominal value of more than €155 billion between 2015 and last year, according to the consultancy firm Axis Corporate, they still carry one of the biggest burdens in Europe.

The face value of NPLs on the balance sheet reached 78.9 billion in Spanish banks in June, 21.26% of the 371.1 billion in Europe as a whole. It is the second largest charge after France (109.7 billion) and far behind Italy (51.8 billion) and Germany (30.3 billion), the next in the ranking.

155.9 billion euros

This is the impaired exposure (non-performing loans and foreclosed assets) that Spanish banks have sold between 2015 and 2021 according to estimates by the consultancy firm Axis Corporate.

The entity that would have disinvested more is Santander, to evict €39 billion; followed by CaixaBank (€24.756 billion) and Sabadell (€24.606 billion). The ranking of investors is headed by the Blackstone fund (€32.440 billion), together with Cerberus (€26.813 billion) and Lone Star Funds (€17.070 billion).

Original Story: El Economista |Eva Contreras Photo: Big Stock Photo
Translation and edition: Prime Yield

Banco Montepio reports a 9-month net income of €23.9 million

The bank highlights the rise in net interest income and commissions, the reduction of operating costs by €16.1 million and lower appropriations for impairments and provisions of €45.1 million.

Portugal’s Banco Montepio had consolidated net income of €23.9 million in the first nine months of the year, against a loss of €14.2 million in the same period in 2021, according to a release sent to the Securities Markets Commission (CMVM. In a statement, the bank highlights the rise in net interest income and commissions, the reduction of operating costs by €16.1 million and lower appropriations for impairments and provisions of €45.1 million.

“Notwithstanding the increases in mandatory contributions related to the banking sector, the Resolution Fund and the Deposit Guarantee Fund of, in aggregate, €3.2 million,” the bank added.

Consolidated net results for the first nine months of 2022 include, in the third quarter, “an estimated impact of -€22.7 million (after considering non-controlling interests) from the agreement signed for the sale of the stake held by Banco Montepio Group in Finibanco Angola S.A.” Even so, the bank added, “the consolidated net results for the quarter were positive, confirming the favourable trend seen over the last five quarters.”

Banco Montepio also noted the five consecutive quarters with positive net results and the increase in “core banking product” of €7.5 million, as compared to the first nine months of 2021, with net interest income up 1% and commissions up 7% on a year earlier.

Loans to customers (net of impairments) increased to €11.8 billion at the end of the period, 1.5% above the value recorded at the end of December. Customer deposits totalled €12.9 billion, up 1.8% from end-year. 

In the statement, Montepio also states that the cost of credit risk stood at 0.1%, down from 0.6% in the period a year earlier.

 In terms of operating adjustments, the bank said operating costs had fallen by €16.1 million or 8.5% as a result of lower staff costs, general administrative costs and depreciation and amortisation.

It also mentions the closure of nine branches compared with the same period in 2021 and the reduction in the number of Banco Montepio Group employees by 138 or 3.8% compared with September 30, 2021.

Original Story: Eco News | Lusa
Photo: Banco Montepio website
Edition: Prime Yield

Demand for mortgages flags

The first consequences of increased uncertainty in the economy are reflected in Bank of Greece data on financing conditions for the coming quarter, with a decline in demand for housing loans due to a deterioration in consumer confidence.

Findings on demand from the business side point to things moving in the opposite direction, both concerning investment loans and working capital; this is mainly a consequence of the increased need to cover high operating costs, as well as the production gap of Greek businesses.

The opposite trends in the financing of households and businesses recorded in the quarterly BoG data on the conditions of bank financing do show some signs of resilience in the Greek economy: In contrast with the corresponding findings of the European Central Bank, it is found that banks have not tightened credit criteria, which remain unchanged in Greece from the previous quarters. A similar picture emerges from the rejection rate for loan requests, which has not changed substantially compared to previous quarters; most loan rejections concerned consumer and housing loans, while the rejection rates for business loans were low.

In contrast, the deterioration of economic conditions in the eurozone due to the rise in interest rates is more evident in bank credit, since, as the ECB observes, the intensifying fears of a recession and banks’ declining risk tolerance have had a significant impact on the credit criteria for loans to businesses, which were tightened, paving the way for the coming recession.

Declining demand for mortgages is a phenomenon observed across the eurozone, driven by rising inflation and interest rates, which puts pressure on households’ disposable income, affecting home-buying decisions, as opposed to businesses for which rising operating costs create increased working capital needs.

The estimates of the Bank of Greece on the continuation of credit expansion in the last quarter of the year are in line with the data recently presented to Parliament by the president of the Hellenic Bank Association, Alpha Bank Chairman Vassilis Rapanos, based on which bank loans amounted to 17.5 billion euros in January-August and will exceed €20 billion in 2022.

Original Story: Ekathimerini |Evgenia Tzortzi Photo: Photo by Svilen Milev in
Edition: Prime Yield

Brazil’s central bank warns of worsening credit risks in 2022

Brazil’s central bank highlighted its growing concern about the effects of lower economic activity on credit risks in the country, pointing to a “relevant” increase in risks on financing families this year.

Based on data from the first half, the central bank’s Financial Stability Report said that household income is increasingly committed to more expensive debt.

Individuals’ ability to pay has deteriorated even amid better indicators for the economy and the labor market, added policymakers.

“About households, (credit) risk materialization grew in a relevant way in 2022 in non-consigned credit, credit card, and vehicle financing,” said the central bank.

Policymakers also pointed out that despite solid portfolio growth, bad assets in microenterprise credit went up.

Reacting to these factors, banks’ provisions have risen to a level considered “comfortable” for the financial system to support expected credit losses, said the central bank.

Even so, there is “growing concern about the effects of a possible frustration of economic activity on the materialization of credit risks,” it said, adding that financial institutions should continue to preserve concessions quality.

While the government officially forecasts GDP growth of 2.5% next year, private economists estimate that the expansion will be around 0.6%, according to a weekly survey carried out by the central bank.

The credit warning comes amid a sharp acceleration in loans in Latin America’s largest economy despite high borrowing costs as interest rates are held at a cycle-high to tame inflation. In the 12 months through September, credit to individuals rose 20.3%, while credit to companies was up 12.0%.

Although expenses with provisions have increased, the banking system’s return on equity (ROE) stood at 15.1% in the 12 months to June, matching the same level from 2021. According to the central bank, higher treasury margins have offset the reduction of credit margins.

Original story: Nasdaq |Marcela Ayres 
Photo: Banco Central do Brasil
Edition: Prime Yield

Spain’s major banks built up a shield of €50 billion against defaults

Spain’s major banks have built up a shield of 50 billion to protect themselves against possible future insolvencies. At the end of September, the five entities listed on the Ibex 35 (Santander, BBVA, CaixaBank, Sabadell and Bankinter) had €49.402 billion in provisions to cover future defaults, which is €1 billion more than at the beginning of the year.

This is also the largest buffer in recent years, even higher than in 2020 (€47.721 billion), the year in which banks made extraordinary billion-dollar provisions in the face of the impact of the Covid-19 pandemic. In fact, although banks have not yet experienced an upturn in defaults (default figures are at their lowest since 2008), they are covered by these provisions made during the pandemic, the bulk of which they have not released, as a precaution.

Even at the onset of the health crisis, banks had high levels of solvency that allowed them to finance families and companies and to apply relief measures to help with repayments. Now, not only are they better capitalised, but they are also more prudent in building up funds to cover possible future losses due to defaults. If in 2019, the year before the pandemic, coverage ratios for bad loans hovered between 50% and 60%, at the end of September this year it was between 60% and 80%. In any case, the sector expects defaults to begin to emerge in the coming quarters and has prepared itself for when the time comes.

Santander has an insolvency fund of €24.813 billion, while stage 3 loans (considered as doubtful) amount to €36 billion. The bank has a coverage ratio of 70%. BBVA is the most risk-averse bank and has provisions to cover practically all doubtful loans. At the end of September it recorded a doubtful balance of €15.162 billion and a fund of €12.570 billion to cover these potential insolvencies. The coverage ratio is 83%, the highest among the main banks.

CaixaBank’s shield against defaults amounts to €7.867 billion. The Catalan entity has a volume of €11.643 billion in doubtful loans, which means that its coverage ratio is 68% (in 2019 it was 55%).

For its part, Sabadell has set aside €3.038 billion to cover possible insolvencies. The bank has a conservative risk policy. It has a strong mortgage business in the United Kingdom through its subsidiary TSB, where loans are well protected and do not run as much risk of default. Sabadell has also been one of the most active banks in the sale of non-performing loans in recent months to clean up its balance sheet.

Bankinter, which has a business model oriented towards medium and high incomes, has traditionally recorded very low levels of non-performing loans. Even so, the bank has €1.114 billion in provisions to cover doubtful loans, which at the end of September amounted to €1.712 billion.

Supervisors call for prudence

Although for the moment non-performing loans (NPL) have not rebounded in Spain, both the Bank of Spain and the European Central Bank (ECB) have been calling for prudence and are monitoring a possible rise NPL in the face of the crisis of high prices and the continuous rises in interest rates to try to curb inflation. “Banks will now start to reassess the need for higher provisions in their portfolios,” said the chairman of the ECB’s supervisory board, Andrea Enria, a few weeks ago in an interview published by the supervisor itself.

For the time being, the situation is under control. During the pandemic, Spanish households accumulated a lot of liquidity, but with inflation running rampant and the cost of money rising due to interest rate hikes, the sector is worried about the rate at which these funds will be burned. To avoid problems, institutions are already looking for measures to mitigate the effects of monetary policy.

In Spain, the two main employers’ associations (AEB and CECA) are negotiating with the Executive to include in the Code of Good Practices measures to help vulnerable families with difficulties in coping with the increase in their mortgage repayments. Similarly, the European Banking Authority (EBA) is monitoring the increase in delinquency. The body wants to avoid at all costs an over-indebtedness of households and that, faced with the credit crunch, families turn to unsupervised financing.

Original Story: Cinco Dias |Newsroom
Photo: BBVA website
Translation and edition: Prime Yield

CGD sees under 1% of clients with “vulnerabilities”

Caixa Geral de Depositos SA (CGD) said just under 1% of clients at the Portuguese state-owned bank are significantly vulnerable to rising inflation and interest rates. 

“What we see is a little under 1% of our customer base where we do see significant vulnerabilities,” Chief Financial Officer Maria Joao Carioca said at the Bloomberg Portugal Capital Markets Forum in Lisbon.  It’s a “relatively comfortable” situation for Caixa Geral at this stage, she said. 

Portuguese lenders have been shedding assets and selling soured debt over recent years to reduce their bad loan ratios. The ratio of non-performing loans at Portuguese banks fell to 3.4% at the end of June, according to the Bank of Portugal.

The European Central Bank last week doubled its key interest rate to 1.5% — the highest level in more than a decade. Bank of Portugal Governor Mario Centeno said in February that the impact of a euro-zone interest-rate hike would be quickly felt by Portuguese companies and families as credit in the country is dominated by variable interest rates.

While most mortgages in Portugal are floating rate, “at least in the last periods, we were already originating close to 30% of mortgages with fixed rates,” Banco Comercial Portugues SA CFO Miguel Bragança said at the same event.

Fiscal Discipline

Carioca, who has served as a board member of Euronext NV, said Portugal should maintain a disciplined fiscal policy to ensure that the country’s bond yields remain in line with other major European economies. Portugal’s government forecasts the budget deficit will narrow to 1.9% of gross domestic product this year.

“It’s crucial that we do not see our spreads broadening a lot versus European cores,” said Carioca. “I think we are very well positioned to ensure that.”

Bragança said that Portugal’s ability to cut public debt and fiscal discipline has been crucial for the southern European country to keep borrowing costs low. 

“Being able to maintain this discipline will be very important,” he said.

Original Story: Bloomberg| Henrique Almeida and Zoe Schneeweiss 
Photo:Edificio sede da CGD
Edition: Prime Yield

Greek banks overlooked but on bumpy road to re-rating – Eurobank Equities

Rising interest rates will provide a significant tailwind to Greek bank earnings this year and the next, Eurobank Equities said, rating Alpha Bank, National Bank and Piraeus  a “buy”.

In a research report, it said Greek bank shares were “out of sync with fundamentals”, up just 3% so far this year and trading at a steep 25% discount to peers in Europe’s periphery.

“A lot of bad news is priced in and we believe the risk-reward balance is tilted to the upside in the long run, given the ultra-low valuation, a 2023 price-to-book value of 0.3-0.5 times,” the report said.

While a sustained rally is not expected in the near term, given uncertainty over the impact of higher interest rates on economic growth and asset quality, there are factors that will offset global macroeconomic headwinds.

Greek banks will benefit from a new credit cycle following a decade of de-leveraging while rate hikes will boost their net interest income, Eurobank Equities said.

Greece’s economy is also proving resilient thanks to tourism while banks’ asset quality has improved in the last three years.

“Besides their higher sensitivity to rate hikes versus EU peers, Greek banks have additional levers to pull, including continuous cost–cutting and accelerated fee generation,” the report said.

Original Story: Reuters | George Georgiopoulos
Photo: Eurobank website
Edition:  Prime Yield

Hercules hits snag from legal loophole

The Finance Ministry intends to refer to the Supreme Court Plenary a decision on bad-loan management companies and their competence to carry out auctions, which points to a new and serious problem for the implementation of the “Hercules” loan securitizations.

Given that it will take several months for a decision to be reached on the appeal to the Supreme Court Plenary, the right of servicers to perform acts of forced execution, such as real estate auctions, is called into question. This development, as estimated by representatives of the management companies, will be a strong blow for the securitizations of “Hercules,” which depend to a significant extent on the expected income from real estate liquidations.

To date, the four systemic banks have inducted into the “Hercules” securitization scheme of bad loans amounting to 47.9 billion euros and have received the guarantee of the Greek state for €18.7 billion. The government guarantee means that if the proceeds to be obtained from these loans through the arrangement and liquidations of assets, i.e. auctions, are not sufficient to pay the investors who have invested in the bonds issued under the securitizations, the state will be obliged to cover this damage through the guarantees it has undertaken in the context of the scheme.

The matter of whether servicers have the authority to carry out auctions has arisen in the wake of a recent Supreme Court decision which prohibits real estate auctions by companies acting as trustees of funds that have purchased bad loans under the “Hercules” state guarantee mechanism. The Supreme Court has issued three consecutive decisions on the matter, which have caused no end of confusion, as the first prohibits the relevant right for management companies, unlike the other two which legitimize their right to proceed with real estate auctions.

The confusion has been caused by a legislative loophole existing in the two securitization laws, which allows for different interpretations on the crucial issue of auctions, on which the implementation relies to a significant extent of the business plans for the securitizations that have been included in “Hercules.”

The decision to appeal to the Plenary represents a retreat by the ministry from its original intention to resolve the issue legislatively, by removing the legal loophole.

Original Story: Ekathimerini | Evgenia Tzortzi
Photo: Photo by Jonte Ramos in
Edition: Prime Yield

Hedge Funds step into Brazil lending as government pulls back

Brazil’s hedge-fund industry is diving deep into credit as higher interest rates attract investors and government-owned banks pull back on cheap, subsidized loans to corporations.

Vinland Capital Management Gestora de Recursos Ltda. and Occam Brasil Gestao de Recursos Ltda. are among hedge funds planning to offer credit products after the nation’s benchmark interest rate jumped to almost 14% from 2% last year, luring investors back to bonds. 

Local fixed-income funds posted net inflows of 106 billion reais this year through August after raising 232 billion reais for all of last year, according to Anbima, the capital-markets association. And this time they’re not buying only Treasury bonds as in the past, but are starting to hold more corporate debt — mostly high-grade, but also high-yield and distressed — and financing infrastructure projects, fintechs, small firms and agribusinesses. 

“This is a great revolution for Brazil’s financial system,” said Daniel Sorrentino, managing partner and country manager for Brazil at Patria Investments Ltd., an alternative-investment firm with $26.3 billion under management in Latin America. “Now I don’t need a big bank to get a loan in Brazil — I have other alternatives. And this direct connection between the investor who will provide the financing and those who need it is being made by fintechs, brokerage firms and independent asset managers.”

The result is that, for the first time ever, investment funds along with individual investors are buying a meaningful amount of corporate bonds — almost as much as the loan book at government-owned development bank BNDES, which used to be one of the main sources of funding for Brazilian firms. As of June, investors held 442 billion reais in those securities, 82% more than two years ago, according to JGP Gestao de Recursos Ltda. BNDES has a loan book of 463 billion reais, 40% below its peak in 2015, according to its financial statements.

“The government reduced subsidies to corporate financing in Brazil, cutting the volume of new lending from its banks and bringing BNDES’s interest rates to market levels,” said Alexandre Muller, a partner and portfolio manager in Rio de Janeiro at JGP, which has 1.3 billion reais of credit funds under management. “The credit markets replaced them and are booming.”

As funds and individuals buy mostly floating-rate credit, more brokerage firms are trading it, and independent financial advisers are bringing more transactions directly from companies to the market, Muller said, adding that secondary markets are also developing. 

It’s not just government-owned banks that have been shrinking financing to big corporations, according to Daniela Gamboa, head of private credit and real state at SulAmerica Investimentos. The nation’s biggest banks face more restrictive capital requirements, and are favoring individuals over big companies because retail clients offer more attractive spreads. 

SulAmerica has about 13 billion reais in fixed-income funds with more than 50% of its holdings in corporate credit, compared with 5 billion reais about two years ago. For the whole industry, those types of credit funds had 17 months of consecutive inflows through July, according to JGP.  

Most clients still seek funds that allow them to withdraw money on the same day or the day after a request, and they typically hold liquid, high-grade corporate bonds, Gamboa said. But longer-term, sophisticated strategies are being brought to the market every day, she said.  

Financial-technology companies are also able to obtain financing by selling credit-card or even car loans directly to credit funds, using structures such as FIDCs, funds that buy credit-backed securities. The amount of FIDCs rose to a record 313.2 billion reais in August, a 10% increase from December, according to Anbima. Those structures are also used by longer term funds that specialize in buying agribusiness credit, distressed credit and legal claims. Other firms offer funds that buy asset-backed bonds that are tax-exempt for individuals. 

Some funds can offer investors yields as high as 19%, but require waiting periods of 60 to 180 days for withdrawals, said Rafael Fritsch, chief investment officer at Root Capital, a Rio de Janeiro-based firm founded in April that specializes in credit, with 1.7 billion reais in committed capital from clients.

Vinci Partners Investments Ltd., SPX Gestao de Recursos Ltda., Legacy Capital Gestora de Recursos Ltda. and Ibiuna Gestao de Recursos Ltda. are among other Brazilian hedge-fund houses that have started credit-fund strategies or purchased specialized firms. Many new credit-focused asset managers are also being formed.

There is a lot of room for the market to grow, as banks still hold by far the majority of corporate credit in Brazil — the opposite of how the market in the US shapes up, according to Jean-Pierre Cote Gil, a credit portfolio manager at Vinland.  

Original Story: BNN Bloomberg | Cristiane Lucchesi 
Photo: Photo by Magda S in
Edition: Prime Yield

NPL break with six months of moderation after the first interest rate hike

The NPL ratio rose in August to 3.86%, from 3.85% in the previous month due to the increase in unpaid loans in consumer finance, according to data published by the Bank of Spain.

The default rate on loans granted by Spanish banks in August broke the downward trend it had maintained for the previous six months and did so after the European Central Bank (ECB) raised interest rates for the first time in eleven years in the euro area; and after inflation peaked in Spain at 10.8% in July. Specifically, the NPL rate rose in August to 3.86%, from 3.85% in the previous month due to the increase in unpaid loans in consumer finance, according to data published by the Bank of Spain.

The outstanding loan portfolio at the end of August totaled €1,225 billion, down from 1,233 billion the previous month, while NPL had fallen to 47.237 billion, some 200 million less.

Compared with August of the previous year, NPL fell from 4.43% at that time to 3.86% in August 2022 and the balance of NPL decreased by more than 6.3 billion. In addition to the total data for the sector, the Bank of Spain publishes each month the aggregate NPLs of banks, savings banks and cooperatives (rural banks), on the one hand, and, on the other, those of consumer finance companies.

Thus, although the sector as a whole rose slightly, NPL ratio from banks, savings banks and cooperatives remained at 3.77% in August, exactly the same rate as the previous month. NPL remained unchanged despite the fact that the loan portfolio fell slightly, to 1,174 billion, thanks to the fact that the balance of defaults fell by the same proportion, to 44.343 billion.

In consumer finance, however, the ratio worsened from 6.28% to 6.30%, with a volume of doubtful loans of €2.705 billion, slightly lower than the 2.728 billion in July. The explanation for the rise lies in the fact that the loan portfolio was reduced to a greater extent, to 42.907 billion. As for provisions, or the capital buffer with which institutions face possible impairment or insolvency, they continued to fall in August to €32,981 billion.

Original Story: La Información | Newsroom 
Photo:Photo by Victor Iglesias from FreeImages
Translation and edition: Prime Yield

Millennium bcp posted a 63.4% jump in nine-month net profit

Portugal’s largest listed bank, Millennium bcp, posted a 63.4% jump in nine-month net profit thanks to a robust rise in core income stemming from policy rate hikes and despite losses at its Polish subsidiary.

The lender netted €97.2 million between January and September, up from €59.5 million a year earlier. Profit in its domestic business more than doubled to €295.7 million.

Its half-owned Polish subsidiary, Bank Millennium, reported a nine-month loss of €270.5 million as it counted the cost of loan repayment holidays imposed on Polish banks in July. r

Millennium bcp benefited from interest rate hikes by the European Central Bank to control inflation, after years of record low rates pressured lenders’ financial margins, and by central banks in other countries where it operates: Poland, Angola and Mozambique.

Millennium bcp’s consolidated net interest income, or earnings on loans minus deposit costs, rose 32.7% to €1.54 billion in the nine months. Its fees and commissions grew 3.7% to €573.8 million.

Chief Executive Miguel Maya said that “performance was supported by a 24.7% increase in the group’s core income and a strict management of operating costs”, but were hampered by results in Poland.

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

Delinquency increases in the «0 km» segment and Brazilians are renting more cars

The most recent data on financed car purchases point to a slow and consistent process of increasing delinquency. Faced with the limited supply of cars with more affordable prices for most consumers, the auto trade is losing the protagonism that it once had and corporate sales, especially to rental companies, have become the salvation of the automakers to avoid greater idleness in factories – it is a dangerous process of automotive deindustrialization in the country. This is the portrait of the Brazilian market and, for now, there are no signs that anything will change.

The default rate on new car loans, released this week by the Central Bank of Brazil, reached 5.1% in August, 0.2 percentage points above the average recorded in July. It is six consecutive months of high index, which measures the delays superior to ninety days in the financing payments.

In comparison to August 2021, delinquency rose 1.7 percentage points, influenced by the greater indebtedness of families whose income is being eaten by inflation. Since the beginning of the year, the index has advanced 1.1 percentage points, more than in the whole of last year, when the rise was 0.9 pp.

For Anfavea, according to its president Márcio de Lima Leite, credit is getting more expensive and more difficult, but it doesn’t mean there is a demand crisis. Even because the volume of delivery of brand-new cars is growing – and driven, it is true, by rental companies.

This segment is quickly recovering the volumes left behind because of the semiconductor crisis, which greatly limited production in 2021. According to Marco Aurélio Nazaré, president of ABLA, Brazilian Association of Car Rental Companies, delivery times have improved compared to last year, when the rental market waited up to 180 days to receive a brand-new car.

Comparing the pace of the first quarter of this year with the following three months, purchases by rental companies grew 85.4%. Nazaré stated that “our sector bought 223,967,000 new cars in the first half of 2022 and these purchases represented 49.3% [practically half!] of the total purchased in the whole year of 2021.”

Result: the total fleet of the rental segment grew by 6.3% in the first six months of 2022. Thus, if the same pace is confirmed by the end of the year, the rental sector expects the market to be even closer to normality next year. Historically, rental companies are responsible for the pur8chase of approximately 20% of all cars and light commercials sold per year in Brazil.

This business, often classified as direct sales, from the manufacturer to the rental company, has everything to grow, increasing the participation of these companies in the total sales result of the national market. This is because there is a need for 500 to 600 thousand cars to balance the stocks of the rental market next year.

Meanwhile, the individual consumer is running out of options because, even with the tendency to stability, the interest rates for the acquisition of brand-new vehicles remain very high, around 27% on average. And with manufacturers giving priority to corporate customers, versions, colours, equipment and finishes preferred by consumers are often missing in dealerships.

Original Story: Uol | Leandro Alves 
Photo: Photo by Cesar Fermino in
Edition and translation: Prime Yield

Novo Banco to reach its NPL’s target by the end of the year, says CEO

Novo Banco (NB) should reach its 5% target for non-performing loans (NPL) “this year in a very short space of time”, the financial institution’s CEO believes.

Interviewed on Bloomberg TV, Mark Bourke said that once this goal is met, the second phase will involve reducing the bad debt ratio between 3% and 4%, a figure that will be achieved in two to three years through a “combination of restructuring and sales”.

The development has happened despite the war in Ukraine and rising rates. “If we look at the situation in historical terms, we are still normalising,” the CEO said. And at least for now this normalisation has not yet brought a significant increase in NPL. In Novo Banco and the Portuguese economy “we don’t see a significant rise in NPL formation”, he said. “And this would be a shared experience among banks.”

Asked whether he is aware of contacts by shareholder Lone Star with potential buyers of the bank, Mark Bourke replied with a peremptory “no, absolutely not”, adding however that “shareholders talk to lots of people”. But management’s role is to “prepare the bank and have it in good shape”.

Original Story: Jornal de Negócios |Hugo Neutel
Photo: Novo Banco
 Edition and translation: Prime Yield

Resolute acquires Piraeus Real Estate Management in Greece

Piraeus Bank SA and Resolute Asset Management Group have reached an agreement for Resolute to provide Piraeus with real estate services in Greece.

In this context, Piraeus Real Estate Management Single Member SA (“PREM”) has been acquired by Resolute Hellas Single Member SA. The agreement refers to real estate servicing, real estate valuation services, and asset and property management of Piraeus’ own-use and non-core properties in Greece.

Piraeus will receive state-of-the-art real estate services, and access to Resolute’s vast experience and expertskills. Resolute Hellas will utilize the specialized know-how of its parent and affiliate companies in the real estate segments, including the market leading technology provided by its technology affiliate, Recognyte, and the advanced agency and property services capabilities of REInvest Greece. 

For Piraeus, the transaction is part of its strategy for further cost efficiencies and targeted assets utilization, bringing cost savings of more than €5mn per annum. Resolute Hellas is a fully owned subsidiary of the Resolute Group. Resolute intends to fully integrate PREM’s operations and employees into its Greek activities, with the aim to further consolidate its market leadership in the Greek real estate servicing, asset management and advisory space. The transaction builds on Resolute’s existing long-standing relationship with the Piraeus Bank Group, including the ongoing management of its non-core real estate portfolio in Bulgaria.

Piraeus was advised by UBS Europe SE as financial advisor and Zeya Law Firm as legal counsel. Resolute was advised by KPMG as financial advisor and KG Law Firm as legal counsel.

Original Story: Resolute AM |Press Release 
Photo: Resolute Linked In
Edition: Prime Yield

Sareb to cede land to develop up to 15,000 ‘build-to-rent’ units

Sareb continues to redefine its strategy. The state-controlled entity will cede land to developers with the aim of encouraging the construction of rental housing throughout Spain. In this sense, Sareb has already launched the process through two tenders to hire financial and legal-fiscal advisors, according to El Confidencial. 

The roadmap of the entity controlled by the Frob (Fund for Orderly Bank Restructuring) is to promote through private initiative between 10,000 and 15,000 build-to-rent units throughout Spain, offering a concession period of fifty years. At the end of the concession period, the homes will become part of the public housing stock.  

This new Sareb strategy is part of the change of direction carried out by the entity in recent months, following the takeover by the State in the first quarter of the year. The decision was in response to the change in the statistical consideration by Eurostat, which means that Sareb’s losses are now counted as public debt.

As part of Sareb’s new strategy, the so-called bad bank launched Project Gas last August. The entity launched real estate loans valued at 1,262 million euros on the market and gave until September to submit non-binding bids. 

Sareb’s deadline was to transfer this portfolio before the end of the year. The portfolio, worth 700 million euros, comes from assets transferred by savings banks with the bursting of the real estate bubble. The bank expected the bids to be discounted by an additional 60 to 70 per cent. 

The Gas Project covers some 3,000 loans with 11,000 residential assets as collateral. Of these, there are some 4,800 homes and the rest are garages, storage rooms and land. Most of these are already in the judicial claim phase or in insolvency proceedings. The provinces with the most assets for sale in this portfolio are Valencia (1,997), Almería (1,400), Barcelona (694), Tarragona (671) and Castellón (666).

Original Story: EJE Prime |News 
Photo: Sareb Linked In
Edition and translation: Prime Yield