NPL pile

NPL ratio stands at 3.57% in November as the stock loans rises

The non-performing loan (NPL) ratio of Spanish banks fell to 3.57% in November from 3.60% in October, according to the latest provisional data from the Bank of Spain.

Despite the slight increase, the ratio is still close to the 2008’s lows recorded in the summer, when it stood at 3.50%. Compared with the tenth month of 2022, the bank’s non-performing loan ratio remained 11 basis points lower, when it stood at 3.68%.

The decline in the ratio was due to the increase in total loans, which offset the slight rise in NPLs. Thus, the total stock of loans held by deposit-taking and financial institutions increased by 17 million euro to 42.396 billion euro. Compared with the same month of the previous year, doubtful loans decreased by 2.974 billion euro.

On the other hand, the total amount of loans granted amounted to 1.186 trillion euro, which means that it increased by 9.396 billion euro compared with October and reached its highest level since July. Compared with a year ago, loans contracted by 45.158 billion euro.

The data broken down by type of institution show that the NPL ratio of deposit-taking institutions as a whole (banks, savings banks and cooperative societies) ended November at 3.45%, three basis points lower than in the previous month, but down from 3.59% a year earlier.

The NPL ratio of financial credit institutions rose to 6.97% in the eleventh month of the year, up from 6.93% in October and above the 6.37% of a year earlier.

According to the Bank of Spain, provisions for all credit institutions fell to €30.249 billion in November, down 0.18% on the month and 6.13% on the year.

Edition and translation: Prime Yield
Original Story: Bolsamania | Europa Press
Photo: Unknown

Piraeus Bank

Greece plans to start stake sale in Piraeus Bank by March

Greece’s bank bailout fund will start a process to sell a stake in Piraeus Bank, the country’s third largest lender, by March, two sources familiar with the matter told Reuters.

It’s the third such sale since October from the state- controlled Hellenic Financial Stability Fund (HFSF), which was set up to recapitalise Greek banks during the country’s decade-long financial crisis which ended in 2018.

HFSF holds 27% in Piraeus Bank, with a market value of 4.37 billion euros, and has yet to decide whether to sell all or part of its shareholding.

“The plan is for the sale to take place at the end of February or early March,” a banker with knowledge of the matter told Reuters.

“There is no final decision yet on the stake. It might be 17%-18% or the whole stake,” he added.

A second source involved in the process said that it would likely be a combined sale to retail and institutional investors.

HFSF has mandated BofA as an advisor on its stake.

After injecting about 50 billion euros into the sector, HFSF started reducing its participation in four major Greek banks last autumn as part of its divestment from the lenders which have been recovering.

Original Story: MarketScreener | Author: Reuters
Edition: Prime Yield
Photo: Serge Mouraret / Alamy Stock Photo

Porto night

DoValue prepares to exit the Portuguese NPL market

After LX Partners, it’s now the Italians at DoValue who are preparing to exit the Portuguese distressed debt market by selling the management company, which has €500 million in assets under management.

More investors are leaving the distressed debt market in Portugal. After LX Partners, whose €4 billion deal will be further developed at the end of the month, it is now the Italian group DoValue, controlled by Fortress and Bain, which is moving ahead with the sale of its non-performing loans (NPL) and property manager in Portugal, with €500 million in assets under management and around 60 employees, according to information gathered by ECO.

The process of selling DoValue Portugal, which the company confirmed to ECO is underway, is being managed by PWC Spain, according to the same sources.

According to DoValue Portugal, “the sale process is progressing positively and already has the interest of more than a dozen potential buyers”.

One of the reasons for the high level of interest, according to the company, has to do with the restructuring, that began in the first quarter of 2023, to “transform the company into a boutique servicer, focused on various strategic services for the regularisation and management of complex assets”. “In this context, we have been attracting new clients, also with a strategic role, thus accumulating a broad and relevant experience for this specialisation,” DoValue Portugal told ECO.

DoValue Portugal’s business has declined in recent years, with sales falling from €21 million in 2019 to 7.1 million in 2022, according to the InformaDB company database. It closed 2022 with losses of almost €3 million. Until September this year, sales totalled €3.8 million, the company told ECO.

The Italians entered the Portuguese market in 2019 with the acquisition of Altamira Portugal, which two years earlier had bought the business unit responsible for managing Oitante’s real estate assets and credit portfolio – the vehicle created to hold the assets of the former Banif that Santander didn’t want to buy.

At the time, Altamira also took over the management of a batch of Oitante’s real estate assets and NPL  totalling €1.5 billion, a portfolio that now has a higher residual value.

In addition to the agreement with Oitante, DoValue Portugal also manages a portfolio of non-performing loans for Davidson Kempner.

Listed on the Milan stock exchange, DoValue claims to be the largest servicer in Southern Europe. The group is controlled by Fortress and Bain, which own more than 40 per cent of the company. Both funds have other investments in Portugal. For example, Fortress is preparing to acquire a €230 million NPL  portfolio from Banco Montepio, ECO announced at the end of last year.

Edition and translation: Prime Yield
Source: ECO | Alberto Teixeira
Photo: Shutterstock Photo

Slowdown in property prices is a risk for NPL in Portugal, warns DBRS

DBRS talks of a prolonged period of inflation and high mortgage rates that could put pressure on the system, especially given the vast majority of variable rate mortgages in the Portuguese economy.

DBRS Morningstar classifies the Collateral Performance Outlook for 2024 (the real guarantees attached to defaulted loans) in Portugal as “Stable”. The 2024 Credit Rating Outlook is also classified as “Stable”.

Similarly, the Portuguese Non-Performing Loans (NPL) securitisations rated by DBRS performed well, with all the notes rated by the agency (relating to four operations) having been repaid in full.

DBRS points to potential risks in future transactions. These include the slowdown in residential property prices in Portugal following the rise in interest rates. Property prices still increased by 8.7% in the 2nd quarter of 2023 compared to the previous year, compared to 13.2%  in the 2nd quarter of 2022, it points out.

DBRS speaks of a prolonged period of inflation and high mortgage rates that could put the system under pressure, especially given the vast majority of variable rate mortgages in the Portuguese economy.

Vulnerabilities are becoming visible, with new measures introduced in September 2023 to support households facing greater financial pressure, says DBRS.

“As emphasised in our commentary on foreclosures and bankruptcies, longer legal deadlines and the backlog of foreclosure and bankruptcy proceedings could affect performance and place increased importance on the manager’s ability to achieve out-of-court solutions,” the analysis reads.

Regarding the European NPL securitisation market, DBRS says that “in terms of credit performance, the situation last year leaned more towards the negative, but still without any obvious general trend”.

“Most of the well-performing transactions, such as Irish, Portuguese, more recently Italian and UK, have continued to deleverage, with a healthy level of loan recoveries and note repayments; however, older Italian and Spanish NPL securitisations continue to struggle to reverse their past performance,” says DBRS in its European NPLs 2024 Outlook.

The European NPL market slowed down significantly in 2023, says DBRS, which adds that none of the transactions suspended after the European Central Bank began raising interest rates resumed during the year.

“With the exception of some concentrated issuance in the final weeks of the year, activity in this asset class was the quietest since issuance resumed in 2016 following the Great Financial Crisis,” says DBRS.

The analysis focuses on Asset-backed Commercial Paper, Residential Mortgage-Backed Security, and Auto.

NPL securitisations outside government asset protection programmes, seen in jurisdictions such as Cyprus, Ireland, Portugal, Spain and the UK, depend on European securitisation market conditions. Here DBRS Morningstar expects “public issuance of senior notes during 2024 to be broadly in line with what we saw during the post-pandemic, pre-Ukraine invasion period (2021-2022) at 200 to 400 million euros per year, given that interest rates are now stabilising”.

As in 2023, the year could also see securitisations of smaller NPL portfolios, re-performing loan portfolios (which have returned to performing status after ceasing to be so) that can be sold from existing securitisations and other more esoteric mixed asset class transactions involving NPL and loans with a low probability of repayment.

For 2024, the rating agency expects the rating outlook to remain stable in all jurisdictions covered by the analysis, “with stable credit outlooks for most of them”.

“We maintain our negative credit outlook for Spain and Italy – the two jurisdictions where we have seen difficulties in some of the transactions assessed over the past few years, including in the face of prospects for delayed recovery and, in some cases, a downwardly revised total recovery amount.”

“An important factor to consider for the European NPL space in 2024 will be the recent renewal of Greece’s Hellenic Asset Protection Scheme (HAPS), which was approved on 4 December 2023 with a total guaranteed amount of €2bn of securitised bonds and a new expiry date of 31 December 2024 (unless extended by subsequent decree). We believe that many of the Greek banks – both systemic (Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank) and other non-systemic banks – will take advantage of this renewal and securitise some or all of their NPL stocks before the guarantee expires,” says DBRS.

Edition and translation: Prime Yield
Original Story: Jornal Económico | Maria Teixeira Alves
Photo: Bigstock Photo


Spain’s High Court annuls €91 million in fines for four big Spanish banks

Spain’s High Court has annulled 91 million euros of fines imposed on four Spanish banks, including Santander and BBVA, for selling interest rate derivatives to customers above market rates.

The competition watchdog imposed the fines after it considered the lenders, which also included Caixabank and Sabadell, had fixed above market rates the price of derivatives that were used to hedge the interest rate risk associated with syndicated loans for project finance.

“The court considers that it has not been accredited that during the entire period under investigation from 2006 to 2016 there was a common plan between the sanctioned entities that justifies the legal classification of a single and continuous infringement”, the court said in a statement.

The court upheld the appeals filed by Santander, BBVA Sabadell and Caixabank against the watchdog’s rulings of Feb. 13, 2018.

Original Story: Reuters | Jesus Aguado
Translation: Prime Yield
Photo: Unknown

The proportion of those indebted rose to 77.6% in December, while those failing to pay fell to 28.8%

Brazilians became more indebted between November and December 2023, while defaults improved slightly, according to the National Confederation of Trade in Goods, Services and Tourism (CNC). On an annual average, indebtedness fell in 2023 for the first time since 2019, while defaults peaked at almost a third of the population, the organisation said in its Consumer Indebtedness and Default Survey (Peic).

The proportion of households with overdue bills rose from 76.6% in November to 77.6% in December 2023. However, the result is still lower than a year earlier, in December 2022, when 78.0% of households were in debt.

“Indebtedness is fundamental to economic development, as credit is the springboard of the capitalist system,” CNC chief economist Felipe Tavares said in an official statement. “Default is a negative consequence of indebtedness, caused by the low income of Brazilians and the volatility of the country’s economy,” he added.

For the purposes of the survey, debt is defined as accounts due in the form of credit cards, overdrafts, store bills, payroll loans, personal loans, post-dated cheques, and car and house payments.

“The increase in indebtedness in the last month raises a point of attention in relation to the indebtedness of Brazilian families, given the high percentage of indebted families. Despite the high percentage of indebted families, family debt as a percentage of GDP is around 30%, which is not a high percentage compared to the US market, where family debt represents 73% of US GDP,” the CNC study added.

The proportion of consumers with overdue bills fell from 29.0% in November to 28.8% in December 2023. In December 2022, the share of delinquent households was higher at 30.0%.

The proportion of families who said they were unable to pay their arrears and therefore remained in arrears fell from 12.5% in November to 12.2% in December 2023. This is still higher than in December 2022, when 11.3% were in this situation.

Annual average

In 2023, the annual debt rate stood at 77.8% of the population, just 0.1 percentage points lower than in 2022.

“The decrease in the overall Peic indicator, although small, represents a victory in relation to the worrying evolution of household indebtedness,” says the CNC report, stressing, however, that eight out of ten Brazilians still have debt in their name.

The annual default rate will rise from 28.9% in 2022 to 29.5% in 2023. The average proportion of those who said they were unable to pay their outstanding debts also rose, from 10.7% to 12.1% over the period.

“This confirms the importance of well-structured debt renegotiation programmes, such as Desenrola, which is already showing results, with a fall in this indicator in the last quarter of the year, from 13% in October to 12.2% in December last year,” the CNC defended.

Original Story: UOL | Estadão Conteúdo
Translation: Prime Yield
Photo: Free Images /BrunoNeves

Credit expansion of 4% is expected for 2024 and 2025

The Greek banking sector will see this and next year a credit expansion of 4% per annum, per Eurobank Equities, ensuring resilience in interest income and profitability for Greek banks.

This is ahead of the imminent reduction of interest rates by the ECB, expected to start from the second quarter of this year.

Bank of Greece data put credit growth in January-November 2023 at 2.8%, affected by low financing to households. In contrast, credit expansion to businesses stood at 6% and the net flow of financing – new loans to businesses after repayment of existing debts – amounted to 1.1 billion euros in the same period.

Original Story: Ekathimerini | Evgenia Tzortzi
Photo: FreeImages (Jonte Remos)
Edition: Prime Yield

Banks’ profitability ‘honeymoon period’ over

Bank profitability will reach record levels in 2023, but is expected to decline thereafter, a trend that will intensify after the interest rate cut from mid-2024. Interest expenses have tripled in 9 months.

Banks’ profitability is expected to weaken in the new year, a trend that will be reinforced by the gradual reduction in interest rates expected from mid-2024.

The year ends with an impressively strong performance by domestic banks, with profitability reaching record levels as a result of the extremely favourable interest rate environment.

The ECB’s sharp rise in interest rates led to a surge in banks’ interest income, as they benefited from the almost immediate pass-through of the increases to borrowers. At the same time, they were able to pass on the increases to depositors to a lesser extent due to the excess liquidity in the system and the structure of deposits with the absolute dominance of demand deposits. 

The limited volume of deposits and the small size of the average deposit make it pointless for depositors to seek better returns through time deposits. As a result, the bulk of deposits remain demand deposits with very low interest rates.

Despite this policy, however, the rise in interest rates is gradually being passed on to depositors, albeit with a time lag. It is significant that in the nine-month period from January to September, according to the Bank of Greece, banks’ interest income increased by +96.5%, while interest expenses amounted to €4.07 billion, an increase of +211.30%.

Thus, the final picture of bank profits for the nine months is a modest +4.6%, far from the impressive +96.5% of interest income.

Bank executives estimate that bank profits will peak this year, largely due to the positive interest rate environment, and gradually decline in the following years, while remaining at a high level.

They note that pressure on interest expenses will intensify, while the gradual decline in interest rates that most expect after the first half of 2024 will lead to a decline in interest income.

Moreover, despite claims to the contrary, there is fierce competition among commercial banks in corporate lending, where credit growth is strongest, and this competition is driving down interest margins.

Despite the expected decline in bank profitability from the highs of 2023, the overall picture for profitability in the sector will remain very satisfactory. Moreover, profitability is expected to increase further as large banks continue to cut costs and reduce their branch networks.

Original Story: Yiannis Papadogiannis | Business Daily Greece
Image: Photo by Takis Kolokotronis in FreeImages
Edition: Prime Yield

KRUK buys a €60 million NPL portfolio from Bankinter’s consumer finance business

Bankinter is making progress in cleaning up its balance sheet by selling off impaired assets. Its finance company, Bankinter Consumer Finance, has sold a portfolio of consumer loans and cards, mostly non-performing (NPL), to Invest Capital Malta, part of the Polish debt collection group KRUK. The portfolio, known as the Jábega portfolio, has a gross value of €59 million, according to market sources.

The transaction follows at least two sales by the same bank this year. Bankinter placed the Maui and Kona projects, with a combined gross exposure of almost €340 million. The transactions, advised by GBS Finance, were placed with the UK fund LCM Partners (Link Financial) and comprise €280 million gross in unsecured loans (Maui) and more than €60 million in loans on industrial premises and warehouses (Kona). 

In the first case, a portfolio of NPL to individuals and SMEs with a nominal value of €315 million was allocated (a further €330 million was allocated to Link Capital Management), while BBVA allocated a portfolio of €427 million in financing, also unsecured, to KRUK, and Cerberus allocated a sub-portfolio of €250 million in loans to SMEs, which will be managed by GCBE (formerly Gescobro). The Polish company plans to invest around EUR 175 million this year in the purchase of debt portfolios in Spain, a market that has thus become one of its main investment destinations.

Throughout the year, the banking sector has focused on shedding ballast, believing that defaults would rise due to the higher cost of living with inflation and the vertical rise in interest rates. The consultancy firm Atlas Value Management estimates that transactions with a gross volume of €25,000 million will be concluded this year, of which 67.30% will be unsecured loans, similar to the transaction just concluded by Bankinter.

The portfolios of most banks (Santander, BBVA, CaixaBank, Bankinter, Sabadell, Abanca, Unicaja and Cajamar), their financial subsidiaries and those of El Corte Inglés and Carrefour, as well as other players such as Sareb, Cofidis, Blackstone, Axactor and the investment banking division of Deutsche Bank, have been placed on the market. 

KRUK has been one of the most active players this year in the acquisition of unsecured NPL. Before the summer, the Polish collection company took over two of the largest transactions launched by banks in this type of debt: a sub-tranche of CaixaBank’s Twister project and another of BBVA’s Nairobi project.

Original Story: Eva Contreras | El Economista
Image: Website Bankinter
Translation & Edition: Prime Yield