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Brazilian credit market slows down but it’s healthier

Confirming An expected scenario, the Central Bank’s financial stability report shows that the risk appetite of financial institutions fell in the first half of the year, as well as the supply of credit to families and companies, as a result of the restrictive monetary policy and the increase in default rates.

Banks also increased their provisions, which, while contributing to the resilience of the Brazilian system, led to a slowdown in their portfolio profitability by 6 percent in the 12 months through June. “The good news is that financial institutions are improving their credit analyses and, consequently, the quality of their portfolios”, said Central Bank’s oversight director, Aílton Aquino.

While the growth of real estate and payroll credit lines remained more or less stable for individuals, the active credit card portfolio has slowed sharply due to the bank’s more conservative approach, from around 30 percent per year in December 2022 to 15 percent in June. As a result, credit card stock also slowed, reaching BRL 505 billion – around 2 percent growth from December last year, compared to a 26 percent increase between the previous half-year periods.

Amid the heated debate over the need for congressionally mandated regulations on revolving credit by January 2024, data from the Central Bank’s report shows how much credit cards have weighed on family budgets, especially in the post-pandemic period. The burden of credit cards on personal income rose from 23.6 percent in 2019 to 30.7 percent last June. “We clearly see that credit cards have taken an important share of families’ income. It is not surprising that the current discussion on article 28 of the law that created Desenrola, the federal government’s debt renegotiation program, says that the market needs to find a solution to revolving credit interest rates,” Mr. Aquino commented.

In the case of companies, there was also a decline in new lending but an improvement in the share of “problem assets” — those overdue more than 90 days — except for micro and small enterprise, segments where problem assets accounted for 16 percent and 12 percent of the total in June, respectively. “This is a warning sign for the system as the high indebtedness of these firms continues to manifest itself in the materialization of credit risk and there is no sign of this changing in the short term,” Mr. Aquino warned. In the report, the Central Bank reiterated that it does not see any risks for the Brazilian financial system related to the increase in Fed interest rates in the U.S., or other external factors. Capitalization levels, liquidity, and provisions — well above the risk of individual and corporate loan portfolios — are adequate, “putting the Brazilian financial system in a comfortable position to face more extreme situations,” Mr. Aquino said. 

For Mr. Aquino, Brazil is prepared for any shock. “Stress tests have shown the robustness of our system.” According to him, because of the Brazilian market’s low exposure to external financing (15 percent), any adverse scenario in which institutions and companies find it more difficult to raise funds abroad would not have a significant impact on the system as a whole.

Original Story: The Brazilian Report | Fabiene Ziolla Menezes
Photo: Photo by Bruno Leiva in
 Edition and translation: Prime Yield

Eurobank posts lower profit up to September on higher provisions

Eurobank, Greece’s largest lender by market value, reported lower profit for the first nine months of the year, on higher bad loan provisions and operating expenses.

Net earnings came in at 980 million euros in the January-to-September period, an annual drop of 11.4%.

Provisions for non-performing loans (NPL) stood at 90 million euros in the third quarter, up from 73 million euros in the same quarter last year.

Greek banks cut their bad loan ratios to below 8% in the first half of 2023 from 45% in 2016, but the ratio is still higher than their peers in the euro zone, the legacy of a decade-long financial crisis.

Eurobank’s NPL exposure ratio (NPE) fell to 4.9% of its total loan portfolio from 5.6% at the end of September last year.

The bank last month was the first from Greek lenders to end state participation in its share capital by repurchasing a 1.4% stake from state-controlled bank bailout fund HFSF.

The completion of the 1.4% share buy-back this year will be followed by a cash dividend payment out of 2023 financial results next year,” Chief Executive Officer Fokion Karavias said in a statement.

Greek lenders have returned to profit in the last few years and hope to resume paying dividends in 2024, for the first time since the Greek debt crisis erupted in 2010.

Original Story: Reuters | Staff 
Photo: Eurobank website
Edition: Prime Yield

Spanish banks increase problematic loans by €4.7 billion in Q3

The main Spanish banks increased the volume of non-performing loans (NPLs) and loans under special supervision by €4,772 million in the third quarter compared with the second, concentrated mainly in Santander and BBVA, according to the latest quarterly report by Accuracy on Spanish banks about the Spanish banking sector.

The company points out that the positive trend in NPLs in recent quarters “seems to have reversed” and began to deteriorate between July and September, leading banks to increase their provisions.

Santander has increased its special monitoring loans by 3.3% and its doubtful loans by 1.74%, due to the growing instability outside Europe. Provisions increased by 22.5% year-on-year, driven by the Americas, although the NPL ratio remained almost unchanged. The cost of risk increased by 27 bp, combined with higher provisions on a loan portfolio that was 2.3% lower year-on-year.

BBVA recorded an increase of 2.93% in the balance of loans under special surveillance due to a 2% increase in credit risk across all geographies. However, the increase in NPLS was mainly due to the worsening of retail loans in South America and Mexico. Provisions increased 30.6%, reflected in a higher cost of risk of 111.2 b.p. in the third quarter. quarter. Even so, BBVA’s NPL ratio remained below the 2022 level, falling from 3.5% to 3.3%.

At CaixaBank, according to Accuracy, the balance of NPLS declined 0.9% quarter-on-quarter thanks to the significant drop in consumer loans, but special surveillance loans increased by 4.4% due to the uncertainties in the housing market, forcing the reclassification of certain mortgages. reclassification of certain mortgages.

Provisions reported by this bank in the third quarter increased 39.0% year-on-year and 36.7% in the quarter to €933 million. Even so, Accuracy does not see a deterioration in asset quality, with an NPL ratio that remained stable at 2.7% in September compared to June. 

Bankinter’s NPL ratio increased slightly by 9 b.p., although NPLS declined by €20 million. The bank reported the largest percentage increase (191.9%) in loan-loss provisions among the main Spanish banks, in a context in which the NPL ratio remained stable: in 2022 it stood at 2.1% and at the end of September at 2.2%.

Sabadell’s NPL ratios remained stable, with loan-loss provisions down 3.7% compared to 2022 due to to lower provisions for financial assets and real estate investments.

Unicaja reduced its NPL balance by 9.6% thanks to the sale of an NPL portfolio. Thus, the bank reported a 5.6% drop in provisions in line with the 8.6% decline in loans and advances to customers and a 23% lower volume of inflows to NPLs. The NPL ratio declined to 3.4%.

Although there are also slight upturns in the cost of risk, Accuracy rules out the possibility of a banking crisis.

Analysing the data by geographies, the provisions of Spanish institutions in Europe increased across the board, with Poland being the country where they rose the most (11%).

On the other hand, Acuraccy points out that the profitability of Spanish banks has also improved across the board, and with the exception of Sabadell and Unicaja, they have started to cover their cost of capital, while the stock market value in recent months of BBVA (+64.7%), Santander (+46.8%) and Sabadell (+56.7%) have outperformed the Ibex 35 (+26.4%) and the S&P 500 (16.6%). The worst performers were Bankinter (+3.7%) and Unicaja (+9.2%).

“After the stock market volatility suffered by banks during the US regional bank crisis, European banks, and Spanish banks in particular, are still on an upward trend. In the short term bullish trend with results that continue to improve across the board in line with the rising markets, thanks to a significant increase in revenues due to the rise in interest rates and efficiency ratios higher than their European and American peers”, says the report.

Original Story: Europa Press | Author
Photo: Photo by Victor Iglesias from FreeImages
Edition and translation: Prime Yield

€4.6 billion in NPL for sale on the market

Caixa Geral de Depósitos (CGD), Montepio and Lx Partners are trying to clear problem assets from their balance sheets.

Anticipating an increase in the NPL ratios among their portfolios, at a time when the risk of default among families has also risen, fuelled by rising interest rates, banks and management companies are looking to clear bad loans from their balance sheets. Caixa Geral de Depósitos (CGD), Montepio and Lx Partners have €4.6 billion up for sale.

CGD has the Pluto portfolio worth €150 million, Banco Montepio has the Côa portfolio worth €233 million and LX Partners has the Cascais portfolio worth €4.2 billion, according to a report in Jornal Económico.

According to the Bank of Portugal (BdP), although the gross NPL ratio remained unchanged at 3.1% in the second quarter (the NPL ratio for individuals also remained at 2.4%), banks increased the ratio of loans in ‘stage 2’ for individuals to 9.5% (compared to 9% in the first quarter).

The increase is most significant for housing loans, where the ratio rose to 9.1%, compared to 8.4% in the first quarter.

The ‘stage 2’ loan ratio refers to loans where banks believe there is a higher risk of losses due to customer default. The stage 2 ratio for consumer and other loans fell to 10.7% in the second quarter from 11.1% in the first quarter.

Original Story: Jornal Económico | Maria Teixeira Alves
Photo: Photo by Svilen Milev on FreeImages
Edition and translation: Prime Yield

Unprecedent biddings for NBG

Bank bailout fund HFSF confirmed the sale of 22% of the share capital of National Bank, out of the total 40.39% currently held by the state, after the unprecedented sum of offers observed in the private placement, with the sale oversubscribed by more than eight times.

The offers collected amounted to €8.5 billion, as a result of which the fund increased the number of shares it made available from 182,943,031 to 201,237,334 in total.

Investors in the Greek public offering must subscribe at the maximum price. It should be noted that high participation was already recorded on the first day the bid book opened (November 14), with bids exceeding €6 billion, pushing the price for subscriptions to the private placement close to the upper price range.

That way, the discount was limited in relation to the current price of National Bank, on the basis of which the shares were made available through the bookbuilding process, which also discounts a lower price compared to that of the dashboard.

The participation in the private placement of large institutional investors abroad was overwhelmingly high, as well as the participation of private and special investors (institutionals) in Greece.

The fact that hedge funds received only 4% of the amount they requested is revealing of the high quality of investors, while the fact that the public proposal in Greece from private investors raised €450 million is indicative of the high demand, not including the participation of special investors who also participated in the public offering domestically.

The participation of long-term investors covered more than half of the demand and, according to the first data from the allocation of shares, among the big investment houses taking positions in National are Fidelity, BlackRock, Capital, Allianz, Lazard and investment funds Norges (Norway), GIC (Singapore), Robeco (Netherlands), RWC (America) and Wellington (America).

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Brazil’s bank lending up 0.8% in September but continues do decelerate over 12 months

Outstanding loans in Brazil rose 0.8% in September from the month before to 5.576 trillion reais, according to central bank data.

The 12-month growth rate of bank credit slowed down to 8%, down from 9% in August, marking a continued trend of deceleration amid elevated borrowing costs.

In the last week of October, central bank reduced interest rates by 50 basis points for the third consecutive time, bringing them to 12.25%. The bank kicked off an easing cycle in August, following nearly a year of maintaining rates unchanged at cycle-high levels in its battle against inflation.

In the minutes of its policy decision, the central bank said that the deceleration in credit extension aligns with the current monetary policy stance, with corporate credit granting experiencing a more pronounced slowdown.

“Household credit, in turn, shows lower deceleration and a recovery favoring low-cost modalities,” it said.

A broad default ratio for both Brazilian consumers and businesses in non-earmarked credit remained stable at 4.9% for the month.

Lending spreads fell to 32.0 percentage points in September from 32.3 percentage in August.

Original Story: Yahoo Finance | Reuter
Photo:Photo by BrunoNeves in FreeImages
Edition: Prime Yield

Positive outlook for the Greek banking sector

ccording to the Bank of Greece, the liquidity and funding conditions of the Greek banking sector improved further.

The Greek banking sector has positive prospects, according to the Bank of Greece (BoG) latest Financial Stability Report.

More specifically, the Greek sovereign’s return to investment grade mitigates the risks to the financial system and the outlook of the Greek banking sector is positive, the central bank said in the report.

However, it noted that heightened geopolitical risks, persistent inflationary pressures, economic growth slowdown and the risk of a sharp repricing of assets in international money and capital markets keep the risks to financial stability high.

Despite the above, banks’ profitability is improving, while the implementation of their strategies for resolving the legacy stock of non‑performing loans (NPLs) continues, it added. The banking sector’s capital adequacy is satisfactory, but banks should further shore up their capital buffers.

According to the Bank of Greece, the liquidity and funding conditions of the Greek banking sector improved further as a result of increased customer deposits and despite partial repayment of European Central Bank (ECB) funding.

As for the ratio of NPL to total loans fell marginally to 8.6% in June 2023, from 8.7% in December 2022. It should be noted that all four significant banks have now reached their single-digit NPL targets, with one of them below 5%. However, actions aimed at resolving the legacy stock of NPLs and converging with the European average (June 2023: 1.8%) should be continued.

Original Story: Naftemporiki | Staff
Photo: Photo by Jonte Remos in FreeImages
Edition: Prime Yield

Santander sets the sale of a €5 billion NPL portfolio

The sales process of project Talos II is expected to start until the end of the year.

Santander is preparing to launch the sales process of a massive non-perming loans (NPL) portfolio until the end of the year. Valued up to €5 billion, the package was named Talos II, after its predecessor Talos I, a NPL portfolio of €600 million sold to Marathon in 2021 for €100 million.

The full value of the portfolio will only be known when it is presented to the market. To this portfolio of non-performing loans will be added another portfolio, called “Sir Barton”, made up of €530 million of overdue loans whose real guarantees are up for sale.

Original Story: Jornal de Negócios | Fábio Carvalho da Silva 
Photo: Santander sede Ciudad Financiera – website Santander
Edition and translation: Prime Yield

Housing loans: NPLs total €1 billion

The volume of non-performing loans amid mortgage credit in Portugal stood at €1 billion at the end of June, stabilising compared with the previous quarter, representing 1.1% of the total volume of such loans.

In the second quarter, the volume of non-performing loans (NPLs) held by the Portuguese financial system fell slightly compared with the previous quarter, totalling €6.3 billion, or €100 million less than the €6.4 billion recorded at the end of March. The decrease is more significant in year-on-year terms, with non-performing loans shrinking by €1.2 billion compared to the €7.5 billion recorded at the end of the second quarter.

This is in the context of a decline in the total volume of credit held by the banking sector, which fell from €226 billion at the end of June 2022 to €207.9 billion in the same month of 2023. On a quarterly basis, the trend is also downward, with total loans standing at €209.6 billion at the end of March.

As a result, the NPL ratio in the Portuguese financial system continued its downward trend over the past year, falling by 0.2 percentage points (p.p.) between June 2022 (3.3%) and the same month in 2023 (3.0%), although it remains one of the highest in Europe, above the EU average (1.8%).

In the quarter ending in June, NPLs to households totalled €2.2 billion, of which €1 billion related to loans for house purchases. However, these figures reflect some improvement compared with the stock of NPLs in the same categories a year earlier, when NPLs to households totalled €2.4 billion, of which €1.1 billion were for house purchase.

Original Story: Barómetro APEMIP |  Staff
Photo: BigStock Photo
Translation and edition: Prime Yield