NPL&REO News

Mortgage delinquencies record highest quarterly rise since March 2014

10 October, 2023

The brutal rise in the Euribor caused by the increase in official interest rates by the European Central Bank (ECB) is beginning to take its toll on families who got into debt to buy a house. The volume of mortgages that accumulated at least three months of non-payment rose by 3.9% between April and June, to €11,823 million euros, as reported by the Bank of Spain. What is most significant, however, is that the increase with respect to March was €443 million. This is the sharpest quarterly rise since the one that occurred between January and March 2014 (€1,619 million), the quarter in which the peak of mortgage delinquency was reached as a result of the bursting of the housing bubble.

The balance of doubtful mortgages has been falling more or less steadily since the first quarter of 2014. In all the years that have elapsed, there have only been occasional and anecdotal increases in five quarters, but in all these cases they were minor (between 55 and 213 million euros) and were followed by subsequent falls. This time, however, there are signs that this could be the beginning of a turnaround. ECB interest rates are at their highest levels since May 2001, the Euribor is at a 2008 high and high inflation is eating away at household income and ability to pay.

Non-performing mortgages, however, account for 2.44% of the total, higher than in March (2.33%), but contained in historical comparison. It is notably lower than the rate of 6.28% reached at the peak in March 2014. In any case, it is likely to increase in the coming quarters. On the one hand, because of the aforementioned increase in unpaid mortgages. And on the other, because the mortgage balance has been falling since June 2022 due to the drop in new operations and the increase in early repayments caused by the inflationary shock. The bank’s mortgage portfolio has fallen by €13,290 million and 2.7% since then, to €483,224 million euros.

Consumer and corporate

Household consumer loans are also registering an increase in non-performing loans. In the second quarter, the unpaid balance amounted to €4,148 million, an increase of €86 million and 2.11%, in line with the rise between January and March. The total consumer loan portfolio increased by 1.43% to €94,580 million, but as the increase in NPL was higher, the default rate rose to 4.38%. On the other hand, in loans to companies, both the non-performing balance (down by €522 million and 2.3% to €22,391 million) and the rate (from 4.13% to 4.09%) fell.

The data on NPLs by segment are published every three months and with a certain delay, but those on NPLs for total credit are more agile, which gives clues as to what is happening with defaults in the third quarter. In July, the total balance of doubtful bank loans fell by €399 million and 0.94%, to €41,774 million. The weight of defaults on total credit to the private sector, therefore, remained for the second month at 3.5%, the lowest level since December 2008. Bankers and supervisors, in any case, have been warning for some time that the sharp rise in interest rates will sooner or later lead to a rise in defaults, although they assure that it will be moderate and to manageable levels for the sector.

Original Story: El Periodico | Pablo Allendesalazar<
Photo: Photo by Jason Hochman from FreeImages
Edition and translation: Prime Yield

Debts on basic utility bills hit record high

10 October, 2023

According to data from Serasa’s Default and Debt Renegotiation Map, Brazilian families are delaying payment of basic bills such as water, electricity, gas and telephone at unprecedented levels.

In August, these expenses accounted for 24.5% of the population’s debts, the highest level for this type of bill since the start of the historical series in 2019.

Also according to the report, basic water, electricity and gas bills represented significant growth among the debt segments, with an increase of 0.53 percentage points (p.p.) in August, and 2.97 p.p. since the beginning of this year.

Original story: Contec |News
Photo: Photo by Marcel Krings in FreeImages
Edition and translation: Prime Yield

Non-financial sector debt falls to 806.6 billion euros in July

10 October, 2023

The indebtedness of the non-financial sector (NFC – public administrations, companies and private individuals) fell by €400 million in July compared to June this year, totalling €806.6 billion, the Bank of Portugal (BdP) said.

Of this total, €440.6 billion related to the private sector (private companies and individuals) and €365.9 billion to the public sector (public administrations and public companies).

In July, private sector indebtedness fell by €1.4 billion, with the indebtedness of private companies falling by €1.3 billion, essentially to foreign countries (€900 million) and to the financial sector (€400 million), in the form of short and long-term loans.

Household indebtedness fell by €100 million, mainly to the financial sector.

As for public sector debt, it increased by €1 billion.

According to the BdP, “this increase was mainly external (€900 million), essentially due to the issue of short-term debt securities.”

In year-on-year terms, compared to July 2022, the indebtedness of private companies and the indebtedness of individuals grew by 0.4% compared to the same month in 2022.

“However, this increase was lower in both sectors than in June 2023, by 0.3 and 0.5 percentage points respectively,” notes the central bank.

The BdP updates its statistics on financial sector indebtedness on 23 October.

Original story: CNN Portugal | Agência Lusa
Photo: Big Stock Photo
Edition and translation: Prime Yield

Fitch upgrades Greece’s four systemic banks ratings

4 October, 2023

Fitch Ratings has just upgraded Greece’s four systemic banks ratings, following a recent round of upgrades of Greece’s credit rating.

More specifically, Fitch Ratings upgraded Eurobank SA’s Long-Term Issuer Default Ratings (IDRs) to ‘BB’ from ‘BB-‘, and Viability Ratings (VRs) to ‘bb’ from ‘bb-‘. The outlooks on the Long-Term IDRs are Stable.

The upgrades reflect structural improvement to Eurobank’s profitability from higher interest rates and low deposit rates; on careful cost management; and normalised loan impairment charges (LICs) following the bank’s successful strategy to reduce balance-sheet risk. This has allowed the bank to accumulate capital, strengthening buffers relative to regulatory requirements and provided greater flexibility to pursue investments and growth initiatives, which we expect to result in greater business-model sustainability.

Fitch Ratings also upgraded National Bank of Greece SA’s Long-Term Issuer Default Rating (IDR) to ‘BB’ from ‘BB-‘ and Viability Rating (VR) to ‘bb’ from ‘bb-‘. The outlook on the Long-Term IDR is Stable.

The upgrades reflect structural improvement to NBG’s profitability from higher interest rates and low deposit rates; on careful cost management; and normalised loan impairment charges (LICs) following the bank’s successful strategy to reduce risk on its balance sheet. This has allowed NBG to accumulate capital well above regulatory requirements and provided strategic flexibility to pursue investments and growth initiatives, which we expect to result in greater business model sustainability.

Fitch Ratings upgraded Piraeus Bank SA’s Long-Term Issuer Default Rating (IDR) to ‘BB-‘ from ‘B’ and Viability Rating (VR) to ‘bb-‘ from ‘b’. The outlook on the Long-Term IDR is Stable.

The upgrade reflects the acceleration of Piraeus’s strategy to reduce risk on its balance sheet, which led to a marked reduction of its non-performing exposure (NPE) ratio to levels more closely in line with higher-rated peers. It also reflects the strengthening of its regulatory capital ratios and the resulting reduction in capital encumbrance by unreserved problem assets (which include NPEs and foreclosed assets). The upgrade further considers Piraeus’s structurally improved profitability, which will drive further capital accumulation; stable funding; and improved access to the wholesale debt market to meet minimum requirements for own funds and eligible liabilities (MREL).

Fitch Ratings has upgraded Alpha Bank SA’s Long-Term Issuer Default Ratings (IDRs) to ‘BB-‘ from ‘B+’ and Viability Ratings (VRs) to ‘bb-‘ from ‘b+’. The outlooks on the Long-Term IDRs are Stable.

The upgrade reflects structural improvement in Alpha’s profitability, which will drive further organic capital generation and result in stronger capital ratios. The upgrade also reflects the continued downward trajectory in the bank’s non-performing exposure (NPE) ratio, stable funding and improved access to the wholesale debt market to meet minimum requirements for own funds and eligible liabilities (MREL).

Original Story: Greek City Times | Athens Bureau
Photo: Alpha Bank website
Edition: Prime Yield

Sabadell prepares first sale of ‘healthy’ mortgages to improve its accounts

4 October, 2023

Spanish banks are looking for new assets to dispose of in order to avoid an upturn in delinquency. This is the case of Banco Sabadell, which has just launched the first sale in its history of mortgages that are up to date with payments, but with poor prospects or which have been in arrears in some instalments, known in the jargon as reperforming loans (RPL).

The bank is working with Deloitte to value the sale through a securitisation of the Dara Project, a portfolio of €300 million in healthy mortgages, but with a probability of non-payment.

Original Story: El Confidencial | J. Zuloaga
Photo: Banco Sabadell website
Edition and translation: Prime Yield

Desenrola: Banco do Brasil reaches unprecedented volume by renegotiating more than R$10 billion in debts

4 October, 2023

Banco do Brasil (BBAS3) has surpassed the R$10 billion mark in renegotiations for more than 1 million people under Desenrola Brasil, a project aimed at resolving bank debts in default.

The volume is unprecedented in the organisation’s history, considering previous actions, BB president Tarciana Medeiros told Estadão.

The Desenrola programme was launched around two months ago jointly by the federal government and Brazilian banks. The focus of the action is precisely to reintroduce people with credit restrictions into the economy. “Desenrola is a case of joint construction, of how public-private partnerships can work very well,” added BB’s president.

According to the bank, of the more than one million clients who have benefited, 40,000 have been micro and small companies and have already renegotiated approximately R$2.5 billion. The figures are equivalent to the Track 2 public, whose defaulted loans are being negotiated directly with the financial institutions under special conditions to be defined by each bank.

New phase of Desenrola

The banks are now preparing for the new phase of Desenrola, which is aimed at customers with debts of up to R$5,000. These loans will have more attractive conditions for renegotiation to be defined by the Programme’s rules and adopted by all the banks that have joined Desenrola.

In BB’s case, the conglomerate has offered discounts of up to 25% on renegotiation interest rates, up to 96% on debts and payment terms of up to 120 months for the publics selected for the Programme. It also made all its physical and virtual service channels available to customers interested in the initiative.

Original Story: Infomoney | Estadão Conteúdo
Photo: Banco do Brasil website
Edition and translation: Prime Yield

BCP puts NPL for sale in the face of rising insolvency warnings

3 October, 2023

DBRS warns of the impact of the increase in insolvencies on Portuguese banks’ non-performing loans (NPL). BCP sells another portfolio after selling the Corporate Restructuring Fund.

BCP has put a portfolio of NPL worth €65 million on the market, according to information gathered by ECO from a market source. This is the “Light Project” that the bank led by Miguel Maya put up for sale last month and which includes loans in default and unsecured.

The year 2023 has been marked by a low volume of NPL transactions in the Portuguese market, after the national banks made a huge effort to clean up their balance sheets in recent years, which allowed them to reduce their NPL levels to 3%.

Even so, in the case of BCP, which declined to comment on the operation, the trend of reducing balance sheet risks continues. As has been the case with the rest of the banking sector.

Meanwhile, Novobanco revealed in its report and accounts for the first half of the year that it had also sold its position in the restructuring fund with a gain of €4.3 million. It seems that BCP and Novobanco sold their positions to Oxy Capital, the fund’s management company, while Caixa Geral de Depósitos and Banco Montepio will launch an organised sale process this month.

Other banks are also carrying out NPL operations. For example, Santander Totta sold three portfolios – Pool 58, 59 and 60 – with a total value of around €130 million. These portfolios include secured and unsecured mortgage loans.

At BPI, the “Citrus Project” involved the sale of a portfolio of problematic secured and unsecured loans also worth around €130 million.

Original Story: CNN Portugal | Alberto Teixeira
Photo: Millennium bcp website
Edition and translation: Prime Yield