NPL&REO News

Greek lenders Eurobank, NBG boosted by higher rates, lower NPL

7 December, 2022

Eurobank and National Bank, Greece’s two largest lenders by market value, were profitable in the first nine months of 2022 as higher rates boosted net interest income.

Eurobank, Greece’s largest lender by market value, reported higher net profit in the nine months of 2022 compared to the same period a year earlier, boosted by stronger net interest, fee and commission income.

The bank reported net earnings of €1.106 billion up from 216 million in the first nine months of 2021. Net profit included gains of €231 million from the spin-off of its merchant acquiring business.

“On a backdrop of economic and geopolitical uncertainties, the Greek economy remains a positive outlier, with a growth rate estimate now at 6% for the year,” said Eurobank’s Chief Executive Fokion Karavias.

He said the bank’s performance exceeded guidance across all lines, with international activities a “steady contributor,” increasing profit by almost 40%.

Improvements in the economy and lower problem loans prompted ratings agency Moody’s to upgrade Greek banks earlier this week.

Eurobank grew net interest income by 8.1% year-on-year in the nine months to 1.1 billion euros, driven by bond income, lending and its international business.

Net fee and commission income rose 21.1% to €395 million, mainly from lending activities, network operations and its cards business.

The bank’s non-performing loan exposure (NPE) ratio fell to 5.6% at the end of September with the stock of bad loans decreasing to €2.4 billion.

Peer National Bank (NBG), Greece’s second-largest by market value, reported lower net earnings in the first nine months of 2022 compared to the same period a year earlier on the back of lower trading income.

NBG, 40 percent owned by the country’s HFSF bank rescue fund, said net earnings from continued operations reached €652 million from €732 million in the first nine months of 2021.

CEO Paul Mylonas said tourism was helping to drive economic growth and revenues were on track to reach a new all-time high while private sector profitability was also helping to cushion the inflationary induced shock to the real economy.

Amid the European Central Bank’s tighter policies, including the tightening of targeted longer-term refinancing operations (TLTRO), NBG’s strong and stable core deposit base and excess liquidity “become a strong comparative advantage,” he said.

NBG’s NPE dropped by about 20 basis points quarter-on-quarter to 5.9% at end-September, already below its 2022 target of about 6%.

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

Itau’s higher profits slightly miss forecasts on bad loan provisions

7 December, 2022

Itau Unibanco SA posted a 19% jump in recurring net profit, which nevertheless landed slightly below expectations as it raised provisions for bad loans amid soaring interest rates.

Latin America’s largest bank reported a third-quarter recurring net income of 8.08 billion reais. Analysts polled by Refinitiv had expected profit of 8.11 billion reais.

High interest rates prompted Itau to hike the provisions it set aside for bad loans by 49.8% to 8.27 billion reais, in line with moves by other Brazilian lenders Bradesco SA and Santander Brasil SA .

Unlike its peers, Itau did not hike its 2022 forecast for loan-loss provisions.

Finance chief Alexsandro Broedel said in a statement the quarterly results reflected “the strength and consistency of our performance over time, in the various lines of business”.

Net interest income (NII) from its customers jumped 33% from a year earlier to reach 23.38 billion reais.

NII it earned from the market, however, fell 73.2% to 516 million reais, it said, citing a bigger retail loan portfolio.

Itau reported a 90-day default ratio of 2.8% at the end of September, rising above the previous quarter’s 2.7% albeit at a much slower pace than its peers.

Original story: Reuters | Peter Frontini
Photo: Itaú website
Edition: Prime Yield

Credit card usage rampage reaches 2008 levels

7 December, 2022

Gathering at home with up to seven credit or debit cards is commonplace. With two bank accounts and a mortgage, the arrival of these plastic cards doubles to 88 million circulating throughout Spain in 2022.

The latest data from the Bank of Spain show that credit cards are being used more and more and debit cards less and less. Moreover, many applications or online payments do not allow debit payments.

By June 2022, there were almost 41 million credit cards in Spain, 7% more than in the same period in 2021 and 15% more than in 2008. The figure has been rising since the end of 2018, when the year closed with almost 37 million cards.

Debit falls by almost 3% to 47.5 million cards issued by June 2022, a figure that contrasts with the increase in this type of payment from 2015 onwards.

The Bank of Spain’s report highlights a new attack on revolving cards. An infinite credit at a very high interest rate that the agency has described as “revolving credit comparable to a permanent credit”.

Non-payments

If there are more cards, there is much more use of them. The pandemic already triggered the payment, but now it has tripled compared to 2008. The year 2021 closed with 6.1 million transactions and almost 200 billion euros in transactions. In June 2022 the amount exceeds 100 billion euros. Their use has risen by 23% and the amounts paid out by 25%.

Banks have already stocked up for a possible scenario of defaults. The numbers, for the moment, are not dramatic. Non-performing loans rose by one point in August, to 3.86 %, and the forecast is that it will not go up because the new criteria for loans or mortgages are very hard to dissuade people.

Original Story: El Debate | Chema Rubio
Photo: BBVA website
Translation and edition: Prime Yield

Novo Banco eyers IPO amid plans to stay independent

7 December, 2022

Portugal’s Novo Banco should be ready to seize the opportunity for an initial public offering when markets open up to listings, as it seeks to remain independent, its new CEO Mark Bourke told Reuters.

Analysts have speculated that profit-making Novo Banco, which emerged from the ruins of collapsed Banco Espirito Santo in 2014 and is controlled by U.S. private equity fund Lone Star, could be merged with another lender looking to consolidate its position in Portugal.

But Bourke, who took over in August, said that “Portugal is not like some of the north European countries, which are massively over-banked”, as the five largest players own 80%-85% of the banking assets, a high level of concentration.

Novo Banco is now “a profitable, well-capitalised bank that can actually compete, endure, remain independent in the Portuguese market, and can invest and expand,” he said.

The bank should build on its recovery track record and “be ready when and if the IPO opportunity arises to take advantage of it”, he said.

Bourke, who had been chief financial officer since 2019, would not say where the bank could seek to be listed, although Portuguese companies usually choose Euronext Lisbon.

MASSIVE BAD LOANS CLEAN-UP

Since Lone Star bought its 75% stake in 2017, Novo Banco has focused on de-risking, closing subsidiaries abroad, offloading bad loans and real estate under tough restructuring commitments agreed with Brussels. Portugal’s Resolution Fund has the remaining 25% stake.

Non-performing loans (NPLs) fell to €1.6 billion, or 5% of total credit, in September from 2.2 billion a year earlier. In 2017, its NPLs were 10.1 billion or 28% of total loans.

“The major part of the job is done. But we need to be looking at the European average, which is in the 2.5%-3% range… in the short to medium-term,” Bourke said.

Novo Banco’s nine-month net profit almost tripled to €428 million, citing improved commission income, capital market gains and a steep drop in impairments and provisions.

“This was the seventh straight quarter of profitability. We can generate 80 to 100 bps of capital through underlying profitability a year – that means we control our own destiny,” Bourke said.

Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% due to higher funding costs of senior debt issuance and other factors, NII rose by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.

The average rate of its net interest margin stood at 1.29%, but the impact of the upward repricing of the portfolios should come in the fourth quarter and Novo Banco should end the year “well above 1.5%”, the upper bound of its forecast range, he said.

Original Story: Reuters |Sérgio Gonçalves
Photo: Novo Banco website
Edition: Prime Yield

Finance Minister urges servicers to resolve private debt problem

2 December, 2022

Finance Minister Christos Staikouras urged servicers and other creditors to align their operations with the state towards an efficient and sustainable management of the private debt problem.

One of the government’s priorities since the beginning of its term is the maximum possible effort to address that problem, he said. Speaking in Parliament, Staikouras said that private arrears fell to 63.6% in the first half of 2022 from 70% in 2018, while the Greek private debt as a percentage of GDP fell to 125.5%, down from an European average of 162.5%.

He noted that NPLs fell to 10% of loan portfolios at the end of the first half of 2022, from 44% in 2019, with the help of the “Hercules” program. However, Staikouras stressed that despite a restructuring of banks’ balance sheets, private debt remained high, with NPLs held by banks totaling 15 billion euros and NPLs held by servicers totaling €87 billion.

He noted there was increased interest by civilians seeking a debt settlement through an out-of-court platform and said that he expected all related financial agencies to complete procedures. He stressed, however, that creditors continued rejecting a large volume of debt settlement requests and said there was significant room of improvement in this area.

Original Story: Ekathimerini | Newsroom
Photo: Photo bu Toomas Järvet in FreeImages.com
Edition: Prime Yield

BTG Pactual posts net profit up to 25.5% to quarterly record

2 December, 2022

Brazil’s Banco BTG Pactual SA reported a record net profit for the third quarter in a row despite what it said was a “pretty volatile year,” driven by interest gains and rising revenues from its main units including sales and trading.

Latin America’s largest investment bank reported a third quarter net profit of 2.19 billion reais, up 25.5% from a year ago and roughly in line with estimates of 2.22 billion reais from analysts polled by Refinitiv.

Total revenue reached a quarterly record at 4.8 billion reais, up 24% on a yearly basis, with BTG’s return on average equity (ROAE) – a gauge of profitability – hitting 22%.

“Our businesses are increasingly diversified and recurring, with higher contribution from customer franchises and rising operating leverage each quarter,” chief executive Roberto Sallouti said in a media release.

BTG’s closely watched sales and trading division reported revenues up 6% on a yearly basis at 1.38 billion reais, boosted by higher client activity, the lender said.

It also highlighted interest revenue almost tripling year-on-year due to higher benchmark rates in Brazil. Revenues from its corporate and SME lending and wealth management units also jumped 46% and 60%, respectively.

Amid the consecutive quarterly net income records, Brazil-traded units in BTG Pactual have soared roughly 40% so far this year.

Analysts at Itau BBA, however, have recently downgraded the investment bank to “market perform,” challenging its valuation multiples by saying the firm had a “fairly balanced risk/reward ratio” right now.

Original story: Yahoo Finance |Gabriel Araújo
Edition: Prime Yield

Cajamar reaches an agreement with Hoist in its plan to sell NPL

2 December, 2022

The entity continues with its intention to get rid of difficult-to-collect assets and has found an ally in the Swedish bank fund, which has recently closed similar operations with Banco Sabadell.

In the midst of the debate on what will happen to non-performing loans (NPL) in the face of rising interest rates, banks are starting to sell off their portfolios of doubtful loans. Cajamar has joined this trend and has closed several deals in recent months, the latest of which was with the Swedish fund Hoist, a subsidiary of the bank of the same name and a usual suspect in this type of operation. The portfolio for sale, in which the law firm Uría Menéndez has participated, was christened Mesana and included secured and unsecured loans and foreclosed assets after a foreclosure process (REO, in financial jargon), according to sources consulted by La Información.

With this operation, Cajamar continues the NPL clean-up plan undertaken in recent months. In the presentation of its quarterly results, the entity chaired by Eduardo Baamonde revealed that in September it closed a similar operation for the Ostende portfolio, with a gross book value of 703 million euros, although it did not reveal the name of the purchasing party. This type of sale has led the entity to reduce its NPL portfolio by 310 million euros (-22%).

The buyer of Project Mesane, the value of which has not been disclosed, is the Swedish fund Hoist, a subsidiary of a bank of the same name. It is a regular player in this type of operation and has once again come to the forefront of the sector after having closed a recent operation with Banco Sabadell, in which the Catalan bank opened a competitive process and had KKR as the second interested party. Before the outbreak of the pandemic, Hoist has been interested in similar purchases, such as Banco Santander’s mega-portfolio for the Old Trafford project.

Like the Swedish entity, other institutional investors have also entered the Spanish market. This is the case of Kruk, Axactor and EOS, which last September shared out Caixabank’s largest portfolio of problematic assets after the pandemic. The German company EOS kept most of it, while the other two parts of the portfolio were divided between Axactor and Kruk. The former was awarded the SME debt and the latter, which in previous months had done the same with debts from Cetelem and Carrefour’s finance company, focused on consumer credit debt.

Pending delinquency

The portfolio acquired from Cajamar comprises three types of assets. On the one hand, secured and unsecured loans and, on the other, REOs (real estate owner), which are foreclosed assets after a foreclosure process. The transaction comes amid expectations about what will happen to delinquency rates. Cajamar’s is below the sector average, according to the company’s own data, which shows an improvement compared to recent months, in view of the data compiled up to March by Alvarez & Marsal.

Original Story: La Información | Cristian Reche
Photo:Cajamar Sede Social – website
Translation and Edition: Prime Yield

Portuguese lender Novo Banco almost triples nine-month net profit

1 December, 2022

Portuguese lender Novo Banco’s nine-month net profit almost tripled from a year earlier, the bank said, citing improved commission income, capital market gains and a steep drop in impairments and provisions.

The bank, which emerged from the ruins of collapsed Banco Espirito Santo in 2014, netted €428 million in the nine month’s to Sept. 30, up from €154 million a year earlier.

Novo Banco, 75% owned by U.S. private equity firm Lone Star and 25% by Portugal’s Resolution Fund, said its pretax return on tangible equity (ROTE) rose to 12.4% in September from 11% in June.

It said in a statement the results showed sustainable growth and “ability to generate revenue and capital despite the uncertain macro (economic) background” and high inflation.

Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% due to the higher funding cost of senior debt issuance and other factors, NII increased by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.

After a major clean-up of its balance sheet, impairments and provisions fell by 86% to €22.5 million, while non-performing loans(NPL) fell to €1.75 billion, or 5% of total credit, in September from 2.2 billion a year ago

Fees and commissions rose 3.8% to €215.7 million in the nine months, while capital markets results increased 34.5% to €68.2 million.

Novo Banco’s fully loaded Common Equity Tier 1 solvency ratio improved to 12.1% in September, 90 basis points higher than in June.

Original Story: Reuters | Sérgio Gonçalves
Photo: Novo Banco website
Edition: Prime Yield

Alpha Bank reports lower Q3 profit, upbeat for 2023

1 December, 2022

Alpha Bank, Greece’s third-largest lender by market value, reported lower net earnings in July-to-September compared with the second quarter on weaker fees and commissions but stronger net interest income.

Alpha Bank, which is 9% owned by Greece’s HFSF bank rescue fund, reported net earnings of 92.7 million euros versus a net profit of 117.3 million euros in the second quarter.

Alpha Bank delivered nine-month 2022 net earnings of 335.4 million euros after a loss of 2.498 billion in the same period a year earlier.

“This strong performance allows us to upgrade our profitability outlook for 2022 to 7% (from 6%),” Chief Executive Vassilis Psaltis said. “Net interest income increased by 12% quarter-on-quarter, to a large extent driven by loan growth.”

With Greece’s economy projected to expand by 2.0% next year, well above the EU average, the outlook for Alpha is “equally positive,” he said.

Improvements in the economy and lower problem loans prompted ratings agency Moody’s to upgrade Greek banks.

Loan growth and a positive impact from higher interest rates helped Alpha increase its net interest income by 12% to 339 million euros in the third quarter. Net fee and commission income fell 6.2% quarter-on-quarter to 92.9 million euros.

Loan impairment provisions fell 34.7% quarter-on-quarter to 58.3 million euros with the bank’s stock of so-called non-performing exposures (NPEs) in Greece flat at 3.2 billion euros.

Alpha Bank’s NPE ratio at a group level declined 20 basis points from the second quarter to 8.0% with clients’ payment behaviour “relatively resilient despite persistent inflation and higher energy costs,” it said.

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