Portugal has the second highest ratio of non-performing loans in Europe

The banking sector’s more cautious stance on lending is having a significant impact on the reduction of non-performing loans. In a challenging macroeconomic environment, marked by rising interest rates, high inflation and continued uncertainty surrounding the war waged by Russia in Ukraine, the sale of non-performing loan (NPL) portfolios in Portugal is not expected to exceed €1.7 billion in transaction volume in 2023, concludes Prime Yield in the latest edition of its annual report “Keep an Eye on the NPL & REO Markets – Portugal, Spain, Greece & Brazil”.

“Despite both indicators continuing to exhibit a downward trajectory over the last year, Portugal maintains the second highest NPL ratio in Southern Europe, only surpassed by Greece, where the weight of non-performing loans in total credit was 4.9%,” the Prime Yield report also states, adding that “despite the progress made in recent years, the Portuguese NPL ratio continues to almost double the European average, which positioned this indicator at 1.8% in the third quarter of 2022.

The current volume is identical to that recorded in 2022, a year in which NPL portfolio sales activity in Portugal fell by 44%, putting pressure on this market at the lowest levels of recent years. Only in 2020, in a context of business paralysis due to the pandemic, NPL sales activity was lower, standing at €1,000 million.

It should be recalled that the peak of non-performing loans transactions in Portugal was in 2019, when it reached around €8,000 million, and that after the fall in 2020 to the aforementioned €1,000 million, 2021 marked a recovery to the levels of 2017 and 2018, with around €3,000 million transacted, a trend that 2022 did not confirm.

In the third quarter of 2022, the national financial system recorded €7.2 billion in non-performing loans, an amount that corresponds to 3.1% of the total volume of credit granted in the country (NPL ratio).

Original Story: Visão| Newsroom
Photo: Big Stock Photo
Translation & Edition: Prime Yield

Intrum buys Haya Real Estate from Cerberus fund for 140 million euros

Swedish debt management specialist Intrum has reached an agreement to buy 100% of its rival Haya Real Estate, owned by US fund Cerberus, for 140 million euros, the companies announced in a joint statement on early may.

The transaction will integrate Haya into Intrum’s structure in Spain, thus expanding its client portfolio and volume of assets under management. Specifically, Haya manages more than 11 billion euros in 105,000 real estate assets, which will now be added to Intrum’s portfolio. The Nordic firm is listed on Nasdaq Stockholm and is active in credit and asset management. It has a presence in 25 countries in Europe and Latin America, and last year it expanded its presence in Spain by acquiring the 20% stake in Solvia held by Banco Sabadell. The deal announced on Thursday will see the integration of a team of more than 550 professionals. The companies expect the deal to be completed in the third quarter of this year, once it is approved by the regulator. The bondholders, who represent approximately 60% of Haya’s 340.3 million debt, have already given the go-ahead.

The Cerberus fund had long sought to divest itself of the real estate asset manager, which was founded in 2013 in the heat of the real estate crisis to manage Bankia’s assets. The decision to divest from Haya accelerated from 2018, when the company’s IPO for more than €1bn was thwarted. At that time it had more than €39,884 million in assets under management by Bankia, Sareb, Cajamar, Liberbank, BBVA and other financial institutions. And the valuation of the servicer (the anglicism used to describe these companies in real estate jargon) exceeded 1.2 billion.

While the sale did not come to fruition, the outbreak of the pandemic opened a restructuring process as a result of Haya’s financial problems. Last year, the company led by Enrique Dancausa agreed an ERE for 185 employees after losing contracts to manage assets from Sareb and Unicaja. The agreement announced Thursday, the companies say, will strengthen Intrum’s relationship with Cerberus, one of the largest investors in non-performing asset portfolios (real estate and non-performing loans) globally. And it will expand the Swedish group’s business with some of Spain’s leading financial institutions such as BBVA, CaixaBank and Cajamar.

In addition, the company highlights that the purchase addresses one of the organisation’s strategic priorities for 2023, by accelerating its commercial development and strengthening its secured credit and real estate asset management business.

Original Story: El País | Sandra López Letón
Photo: Intrum website
Translation: Prime Yield

Bank of Greece says banks should cut NPLs further

The persistence of inflationary pressures and geopolitical tensions, the risk of a sharp repricing of assets in international money and capital markets, as well as the recent turmoil in the US and Swiss banking systems, have considerably heightened risks to financial stability, the Bank of Greece (BoG) said in its Financial Stability Review released on Thursday.

The central bank noted that the Greek banking sector is now clearly better placed than in the past to absorb international market shocks, while the implementation of banks’ strategies for resolving the legacy stock of nonperforming loans helped all four systemic Greek banks to achieve a single‑digit NPL ratio.

The banking sector’s capital adequacy improved further to a satisfactory level, above the regulatory minimum, as banks posted profits after two loss‑making years, BoG said, adding that the liquidity of the sector improved, as a result of increased customer deposits and despite voluntary partial repayments of funds raised through the European Central Bank.

The NPL ratio has declined (to 8.7% in December 2022), although it remains significantly above the corresponding European average.

Therefore, banks should step up their efforts to achieve further convergence, BoG said.

Moreover, inflation and a slowdown in economic activity might affect the financial condition of non‑financial corporations and households, leading to a new wave of NPLs.

Original Story: Ekathimerini | Newsroom
Photo: Photo by Toomas Järvet in FreeImages
Edition: Prime Yield

Corporate defaults hits new record in Brazil

In April, defaults reached 6.5 million Brazilian companies. This was the highest number recorded by Serasa Experian’s indicator since 2016, when the historical series began. The value of debts also reached a record amount, totaling R$ 117.5 billion. On average, each CNPJ has about seven negative accounts.

According to the economist of Serasa Experian, Luiz Rabi, the economic framework of the country continues to impose challenges to entrepreneurs. “The analysis remains the same. Factors such as inflation and the Selic rate are affecting consumers’ purchasing power,” he says. “With expensive inputs and high interest rates, companies’ cash flow does not find room to grow, which makes it unfeasible for business owners to pay off debts.”

Last month, businesses in the service segment accounted for 54% of all defaulters. Next came commerce, with 37%, followed by the industrial (7.7%) and primary sectors (0.8%), and the category “others” (0.5%) – which includes financial companies and the Third Sector

The analysis by Federal Unit showed that São Paulo is the state with the highest number of defaulting companies. In second place was Minas Gerais, followed by Rio de Janeiro, Paraná, Rio Grande do Sul and Bahia.

Original Story:  Metropoles | Carlos Rydlewski
Photo: Photo by Svilen Milev in FreeImages
Translation & Edition:

Banco de Portugal identifies mortgage default as a risk to financial stability

Central Portuguese bank Banco de Portugal (BoP) has identified increased default on home loans as one of the main risks to financial stability, according to the Financial Stability Report published on Wednesday.

In the document, the BdP said that in recent months, “risks to financial stability have remained high” and amongst the main risks and vulnerabilities it noted the possibility of an increase in loan defaults, particularly on mortgages, “due to high inflation, a rise in short-term interest rates and a potential worsening of the unemployment rate.

In Portugal, the preponderance of variable interest rates on home loans means that recent and rapid rises in interest rates immediately increase the burden of debt, making it difficult for private banking clients to pay back loans.

The potential default of the most vulnerable companies is also a risk for Banco de Portugal, which considers that, “despite recent evidence of resilience of the sector, a more unfavourable economic and financial context, characterised by lower economic growth and higher interest rates, will increase the percentage of companies in vulnerability”.

Original Story : TSF /LUSA
Photo: Banco de Portugal
Translation: Prime Yield

87 billion in loans under special surveillance worries banks

The banking sector is on alert due to a stock of 87 billion in loans that remains under special surveillance. Despite the fact that in recent years banks have kept the average default on loan portfolios at bay, they have also been accumulating a greater volume of loans that are under maximum observation due to doubts that customers can meet their payment obligations.

Banks rule out the impact of non-performing loans and explain that they have been improving their NPL ratios in recent quarters. However, other sources familiar with the sector explain that in recent months there have been fears that a possible more unfavourable macroeconomic environment and tougher conditions imposed by banks due to interest rate rises could ignite the fuse that could cause the stock market to explode.

The Bank of Spain, in its latest Financial Stability Report, details that the volume of loans under special surveillance represents some 87 billion. To give an idea of the magnitude, this is 6.5% of Spanish GDP in 2022. The supervisor details in the document that the figure is 12% lower than the previous year, but also that it is still 24.5% of the level recorded before the pandemic.

Banking supervisors classify loans based on their payment quality: stage 1 (healthy credit), stage 2 (credit under special surveillance) and stage 3 (doubtful loans). Although the loans included in the second stage have not yet defaulted, banks have observed a significant increase in risk from the time of granting. This is the stage before impairments occur and therefore this bag is the focus of attention.

Original Story: Cinco Dias | Ricardo Sobrino
Photo: Banco de España
Translation: Prime Yield

Banks and institutions in Brazil have already put R$22 billion in bad loans up for sale this year

One of the many faces of high interest rates is in the amount of credit portfolios, which have not been paid by individuals and companies, and have been put up for sale. In the first quarter, just the big banks – Santander, Bradesco and Itaú Unibanco – offered R$ 17 billion to the market. If smaller banks and other institutions are considered, the offer exceeds R$ 22 billion.

This is slightly more than the same quarter of 2022. But more than the amounts, the fact that a good part of the defaults are returning to the banks draws attention. Reason: the drop in the prices of these portfolios, due to the little chance of recovering the money. The number of CPFs and CNPJs with debts in more than one bank, card or credit institution is very high.

Itaú, for example, one of the institutions that made the offer, put on the market about R$ 6 billion in overdue credits, and sold something like R$ 2.3 billion to MGC Holding, Blue365 and Hoepers. The remainder returned to the bank. According to sources, this is what happened with most of the R$ 17 billion offered.

Itaú Unibanco and Bradesco said that portfolio transfers are part of the bank’s normal operations and will be carried out when there is an economic benefit. Bradesco also said that such operations consider “the value of the portfolio versus expected recovery and cost of the operation”.

Bradesco said that “only assignments that generate economic benefit are effected.” Santander and MGC Holding declined to comment. Blue365 said that “the acquisition of a portion of Itaú’s portfolio further strengthens the position” of the company in this market.

Original Story: Jornal o Sul
Photo: Bradesco website
Edition & Translation: Prime Yield

Sale of Portuguese NPLs should remain at 1.7 billion euros

This is one of the main conclusions of Prime Yield, in the latest edition of its annual report “Keep an Eye on the NPL & REO Markets – Portugal, Spain, Greece & Brazil”. Despite the challenging macroeconomic context, Portugal should not go beyond 1,700 million euros of transacted volume in 2023.

This is an identical volume to that recorded in 2022, a year in which NPL portfolio sales activity in Portugal fell by 44%, not continuing the post-pandemic recovery trend of 2021 and putting pressure on this market at minimum levels of recent years.

Only in 2020 was NPL sales activity lower, standing then at €1 billion. Recall that it was a context of business paralysis due to the pandemic. The peak of ‘bad debt’ transactions in Portugal was recorded in 2019, when it amounted to around €8,000 million, and that after the 2020 drop to the aforementioned €1,000 million, the year 2021 marked a recovery to 2017 and 2018 levels, with around €3,000 million transacted, in a trend that 2022 did not confirm, the report recalls.

Portugal maintains the second highest NPL ratio in Southern Europe

In the third quarter of 2022, the national financial system recorded 7,200 million euros in non-performing loans, an amount that corresponds to 3.1% of the total volume of credit granted in the country (NPL ratio). Although both indicators continued to show a downward trend over the last year, Prime Yield said that Portugal still has the second highest NPL ratio in southern Europe, only surpassed by Greece, where the weight of non-performing loans in total credit was 4.9%. The Portuguese NPL ratio continues to almost double the European average, which positioned this indicator at 1.8% in the third quarter of 2022.

Between the 3rd quarter of 2021 and the 3rd quarter of 2022, the NPL stock in Portugal reduced by 14%, with €1.2 billion of defaults leaving the financial system, from €8.4 billion (3rd quarter 2021) to €7.2 billion (3rd quarter 2022).

Taking into account the NPL sale processes underway in the 1st quarter of 2023, a potential transaction volume of close to €1.5 billion is observed, Prime Yield’s report points out. However, it should progressively increase in the coming months, as new mandates are launched on the market, and it is expected that the year will close with a level of activity identical to 2022, at around €1,700 million.

Caixa Geral de Depósitos stands out as the most active entity, leading two ongoing sale processes: the Saturno project, valued at €600 million, and another portfolio worth €500 million, including assets with and without collateral.

“The expectation for 2023 is that we will see a stabilisation of activity throughout Europe”

Original Story: Iberian Property | Felipe Ribeiro
Photo: CGD website (headquarters)
: Prime Yield

Santander sells distressed loan portfolio worth 1.1 billion euros

Spain’s Santander has agreed to sell a portfolio of distressed loans with a gross value of 1.1 billion euros ($1.21 billion) to U.S. private equity fund Cerberus and real estate loan manager Axactor, Expansion reported on May 5th.

The loan portfolio, dubbed ‘Spirit project’, includes personal loans, some mortgages, and loans to medium and small companies, Expansion said, citing unidentified financial sources.

Expansion did not mention the price or potential discount on the sale of the portfolio, but said the transaction was split into two tranches.

The first loan portfolio, of around 660 million euros, was sold to Gescobro, a Spanish unit of Cerberus, and the second, of around 440 million euros, to Axactor, it said.

Santander declined to comment, while Cerberus and Axactor did not immediately reply to a request for comment.

Spanish banks were very active in the past in shedding real estate assets that went bad in the economic slump that followed the bursting of Spain’s real estate bubble at the end of 2007.

Lenders are now selectively repackaging loans in an attempt to recover some cash that could turn sour following the economic slowdown and the pandemic.Non-performing loans at Spanish banks were still hovering at near record lows of 3.55% in February, far below the all-time high of 13.6% in December of 2013

Original Story: Reuters | Newsroom
Photo: Facebook Santander
Edition: Prime Yield

Alpha Bank completes the disposal of Project Hermes

Following the initial announcement of early May, Alpha Bank, trough the affiliate companies Alpha services and Holdings SA, has just completed the disposal of the Hermes portfolio, a mixed pool of secured Non-Performing Loans to Greek Large Corporate Entities and Small and Medium-sized Enterprises. This NPL portfolio has a total on-balance sheet gross book value of approximately 650 million euro. 

The operation is divided into tranches. 

“Hermes Tranche A Portfolio” comprises a total on-balance sheet gross book of 240 million euros, sold to Saturn Financial Investor DAC and Pluto Financial Investor DAC, entities financed by funds managed by affiliates of Fortress Credit Corp. 

The “Hermes Tranche B Portfolio” was acquired by Hermes Acquisitions B Designated Activity Company, an entity financed by funds managed by affiliates of Davidson Kempner Capital Management and funds managed by affiliates of Fortress Credit Corp. This comprises a pool of a total on-balance sheet gross book value of 410 million euros.

Original Story: Alpha Holdings Press Release
Photo: Site Alpha Bank
Edition: Prime Yield