Greece sets cap on new mortgages

The Bank of Greece is imposing a cap on new mortgages to prevent excessive lending. In other words, the country’s central bank has decided to set a maximum loan limit in relation to the value of the property and a maximum limit for servicing the debt from housing loans in relation to the borrower’s total income.

The limits will be more flexible for first-time buyers in an effort to make it easier for young people to access bank loans to buy property.

The new limits will apply from 1 January 2025 and provide that the loan cannot exceed 80% of the commercial value of the property. Exceptions will be made for first-time mortgage borrowers, for whom the loan cannot exceed 90% of the value of the property. In addition, the cost of servicing a borrower’s loan obligations cannot exceed 40% of their annual income. The exception is again young buyers, for whom the limit rises to 50%.

Under the new rules, banks will be allowed to exceed the above two limits by 10% of the number of new disbursements, and the excess will be tracked separately for first-time buyers and other borrowers.

A first-time buyer is defined as someone who borrows from a bank for the first time to buy a house, regardless of whether they already own a property – e.g. following a parental allowance. The limit for the calculation of the debt service ratio (debt service in relation to income) will concern all the debts one has with the bank. In particular, if the instalment of a mortgage consumes 30% of your income, the bank should also take into account any other debts – e.g. from consumer loans or cards – and add these costs when calculating the index.

Net income, i.e. income after tax and social security contributions, is also taken into account when calculating the debt service ratio.

The setting of limits for housing loans is a measure applied by the majority of European countries, where the limits are in fact much stricter than those applied in the United States.

Original Story: Kathimerini | Autor: Evgenia Tzortzi
Edition: Prime Yield

NPL pile

Europe’s debt collectors face reckoning as bad loans vanish

Europe’s debt collectors have gone from feast to famine amid a collapse in the number of bank loans turning sour.

Companies that recover unpaid bank debts, and which thrived in the aftermath of the euro zone sovereign debt crisis, are rethinking their business models and examining tie-ups with rivals after COVID-19, an energy crisis and two-decade-high interest rates failed to unleash a new wave of loan defaults.

Banks in Europe’s south have largely completed the clean-ups that once fed the bad loan bonanza and pulled in overseas investment firms such as Apollo, opens new tab, Cerberus, PIMCO, Elliott and Lone Star, while government support measures have helped keep companies and households on their feet.

Non-performing loans (NPLs) have held at 1.8% of total bank loans in Europe for six straight quarters, official data show.

In Italy, the continent’s biggest market for bad debts, sales last year totalled 31 billion euros, a third of the 2018 peak. Back then, virtually all disposals came from banks, while more than half of the total in 2023 were re-sales.

Shares in some of the continent’s main players including Sweden’s Intrum, opens new tab – Europe’s biggest debt collector – and Italian leader doValue, opens new tab hit record lows this month as investors weigh whether efforts to restructure their business can work. Both companies declined to comment.

“Several players are undergoing a metamorphosis,” said Francesco Cataldo, a director at consultancy PwC Strategy& in Milan.

Keeping loan managers in activity is important because they can provide a new lease of life to assets – sometimes businesses or properties – that are tied up in insolvency or restructuring procedures, helping economic growth.

Higher debt costs, lower bad loan flows

Many collectors have not only stopped buying new impaired loans now that debt costs make that economically unviable, but are also shedding assets bought in the past.

Intrum, whose shares are down 78% this year, in January sold a nominal 33 billion euro loan portfolio to Cerberus, retaining management of the loans and using the cash to cut its recently downgraded debt. It is working with advisers to improve its debt position.

Similarly, Italy’s Mediobanca (MDBI.MI), opens new tab in October quit the NPL investment business and sold its arm that held a nominal 6.5 billion euros in bad loans.

Intrum’s ‘capital light’ model was embraced last week by Italian state-owned bad loan manager AMCO when it presented a new three-year strategy, saying it would reduce loans under management and cut its financial debt to zero.

“Banks have minimal impaired loan levels and high capital buffers,” AMCO said, pointing to structurally lower new bad loan flows and mounting competition in the sector, where firms must comply with new European Union regulation by mid-2024.

Banks’ healthy loan books also threaten collectors that never invested directly in NPLs, relying instead on contracts with lenders outsourcing debt recovery. As they gradually expire, those multi-year contracts may not be renewed.

Italy’s doValue, which is backed by Japan’s SoftBank Group, opens new tab and has a key UniCredit, opens new tab contract ending in 2025, is expected to outline alternative revenue sources.

Its shares have lost 47% this year after it reported a 2023 loss on an impairment it booked on its operations in Spain, where it lost a major contract in 2022.

M&A Revival

In a crowded market, mergers offer an obvious way for debt collectors to reduce competition and increase scale.

But investment bankers say the poor performance of listed bad loan specialists renders valuations unattractive for sellers.

Multiple deals have been explored but failed to go through in recent years, with varied business models making it hard to set price tags that would spur big investment funds to sell the debt servicers they bought in the boom times, the bankers said.

Hopes of an M&A revival are now pinned on fintech group ION’s 1.3 billion euro acquisition of Italian loan manager Prelios from U.S. hedge fund Davidson Kempner.

Valued at around nine times its core profit, Prelios could set a benchmark for future deals, two industry sources said.

ION gained government clearance this month to buy Prelios and now needs central bank approval. It is then expected to merge Prelios with Cerved, another NPL business it bought in 2021.

Original Story: Reuters | Author: Valentina Za
Edition: Prime Yield

Acropolis tourism of greece

Greece continues to have the worst performance in household credit

Greece continues to have the worst performance in household credit in Europe, registering a consistently negative rate, which was -1.7% in January against a 0.3% increase in the eurozone, according to a report published by DBRS Morningstar, focusing on the “slow production of new mortgage loans.”

The rise in interest rates and high inflation have made the growth rate of loans in the eurozone shrink, as it plunged from 4.5% in the first half of 2022 to a marginally positive rate in 2023. This contrasts with a steady contraction in Greece, due to large repayments exceeding new disbursements.

The aversion to borrowing by households is observed despite the fact that the vast majority of new mortgage disbursements in Greece are at fixed interest rates, which, through successive reductions made by Greek banks recently, have fallen to historic lows. 

Fixed term rates start at 3% for a 3-year term, while last week Eurobank further reduced the 10-year fixed rate and above by 0.30 points, which starts at 4.10% and reaches 4.30% for periods of 15, 20, 25 and 30 years.

As DBRS observes, the high interest income of Greek banks, which increased by 51% year-on-year, is mainly linked to the strengthening of the portfolio of business loans, which grew by 5.1% in 2023, against an average increase of just 0.2% in the eurozone, despite stricter lending criteria, high interest rates and high repayments. 

Interest income amounted to €8.1 billion at the end of 2023 compared to €5.4 billion in 2022 and according to DBRS this is mainly due to the overall better performance of the Greek economy, as well as the disbursement of loans linked to the country’s growth and the Recovery Fund funds, which “will continue to support the growth of the loan portfolio combined with some recovery foreseen for new mortgages.”

Fee income in 2023 was €1.8 billion compared to €1.7 billion in 2022, up 7%, driven by increased trading income, grant activity and sales growth activity investment and bancassurance products.

Original Story: Kathimerini | Author: Evgenia Tzortzi
Edition: Prime Yield

Digo Poster

Diglo achieves 3 million profit in 2023

Diglo, Santander’s servicer, made a profit of €3m in 2023, more than double that of 2022, when it posted a profit of €1m, according to the bank’s annual report.

In addition, it has launched a technology investment plan for the period 2024-2025 with an amount of more than €4 million.

The aim of the plan, according to sources from the ‘servicer’ explained to Europa Press, is to boost the efficiency of daily internal procedures through automation and the application of artificial intelligence, which will, in turn, result in an improvement in the quality of customer service.

With regard to its activity during 2023, the firm has managed more than 400,000 contracts for debt recovery in the non-performing loan portfolios (NPLs) business and has recorded a 10% increase in the recovery rate on managed stock of NPL compared to 2022.

In addition, the portfolio turnover has been above 30% of published properties, while in the business of managing real estate assets acquired in foreclosure processes (REOs), the servicer has managed nearly 4,000 properties.

Diglo began operating in early 2022 as Santander Group’s real estate servicer under the Deva umbrella, with a total portfolio of more than €5 billion in assets.

Its function is to manage assets acquired in foreclosures (REOs) and non-performing loans (NPLs) of both Santander Group and third parties. In the REOs area, these 4,000 assets of various types (primary residences, holiday homes, logistics assets, residential and offices) spread throughout Spain are grouped together, while in the NPLs business, at the start of its operations, it had around 200,000 contracts under management, 70% of which were SMEs.

This ‘servicer’ is headquartered in Madrid and has ten branches in seven regions: Western and Eastern Andalusia, Catalonia, Central, Levante, Northwest and North, although the network covers the whole of Spain.

Original Story: Bolsamania | Author: Europa Press
Translation and edition: Prime Yield

HFSF is one step before its full divestment from banks

The Hellenic Financial Stability Fund (HFSF) is one step before the complete divestment from Greece’s four systemic banks, after the successful sale of all the shares it owned in Piraeus Bank.

In this way, the cycle of recapitalizations in the Greek banking system will be officially closed and, by extension, for the Greek economy, which is showing resilience as, despite the new challenges, it is moving at a growth rate four times the average of the eurozone.

The HFSF has fully divested from Eurobank, Piraeus Bank and Alpha Bank while maintaining a stake of approximately 18% in National Bank and a holding of approximately 70% in Attica Bank.

As pointed out after the completion of the divestment of the HFSF from Piraeus Bank by the government, the HFSF, the Bank of Greece and financial analysts, this was a vote of confidence by the international investment community, not only for the Greek banking system, but also for the Greek economy.

As noted by the Minister of National Economy and Finance, Kostis Hatzidakis, on the occasion of the successful completion of the sale of 27% of Piraeus Bank shares to foreign and Greek investors, the banking system is turning the page: “From the crisis and the recapitalizations, [we have moved to the] time when high-quality investors express, as was seen in the last months, their interest in all systemic Greek banks,” said the minister, pointing to the fact that the investment interest expressed was eight times greater than the offer.

He added: “The latest developments reward the strategy of the HFSF management which prepared and organized the process effectively. They underline the correctness of the government’s choices, not only for the way and the time the divestment of the state proceeded, but also more generally for the banking system itself. And they are, after all, a very serious national success.”

Double benefit

The successful cycle of the HFSF divestment from the systemic banks started with Eurobank and was followed by Alpha, National and Piraeus. According to data Hatzidakis presented to Parliament in February, the state has not only an accounting but also, above all, a more general benefit from divestment. The data show that for the rescue of the four systemic banks, the Greek state – through the HFSF – has paid a total of 30.9 billion euros, while the benefit it has had is €34.8 billion. That is, the benefit of the state in relation to the €30.9 billion it gave for the recapitalization is €3.9 billion, not counting the 2013-2023 dividends, amounting to €5.5 billion paid by the Bank of Greece to the state, mainly due to the provision of extraordinary liquidity support to the banking system through the emergency liquidity assistance.

Speaking to Parliament on February 19, Hatzidakis emphasized that the results of the divestment in Eurobank, Alpha and National Bank prove the correctness of the government’s choices.

Hatzidakis’ position is echoed by many experts, including University of Athens professor of Finance Dimitris Kenourgios, who told Kathimerini English Edition that developments “signal a new era for our banking system. We appear to have overcome, with evidence, a period of crisis during which almost half of the loan portfolios were not serviced and banks were unable to play the role of the credit supplier in the Greek economy.”

By saving the systemic banks, of course, the deposits of the Greek citizens were also saved, which were approximately 10 times the cost of the recapitalization, and businesses and households were protected from collapse, according to government officials.

Kenourgios agreed that the purpose of the state’s investment has been fulfilled, even when the PSI haircut and the CoCo redemption are not factored in: “The revenues of the state will be no more than €5 billion, but the flipside of the coin is that through the recapitalizations the banks assisted the Greek economy, the Greek households and the Greek enterprises, and bad loans were reduced. Therefore there has been an indirect effect of the recapitalizations for the Greek economy,” he explained.

Original Story: Ekathimerini | Author: George Georgakopoulos
Edition: Prime Yield

Santander Consumer Lisbon

Santander Consumer earned €1.321 billion in 2023

Santander Consumer Finance, the Santander Group’s subsidiary specialising in consumer finance, posted a net profit of €1.321 billion in 2023, 17.4% less than in 2022, according to the accounts sent by the company to the National Securities Market Commission (CNMV).

The business in Spain and Portugal posted earnings of €806.3 million, almost quadrupling its 2022 result of €206.6 million. Ordinary revenues in this unit increased 65.0% to €1.6 billion.

At the consolidated level, net interest income fell 4.0% to €3.425 billion, affected by the change in the conditions of the TLTRO programme and the rise in interest rates.

In the first half of the year, Santander told Europa Press that the bank was “actively” repricing loans, focusing on the most profitable segments and increasing customer deposits”.

In fact, interest income soared 53.3%, although interest expenses quadrupled to €3.006 billion euros.

Customer loans grew 8.45% to €115.507 billion, while deposits rose 18.1% to  €48.844 billion.

Santander Consumer Finance paid a dividend of €0.32 per share to its parent company, Banco Santander, for a total of €607.4 million and almost 46% of the profit obtained by the finance company in 2023.

Original Story: Capital Madrid | Author: C.M.
Translation and Editions: Prime Yield

Lending to households slows down at the start of the year, falling by 16.3 bn

Lending starts 2024 with the brakes on. Lending by financial institutions to households fell by 2.4% year on year to €679.183 billion, while the decline in lending to non-financial corporations was somewhat milder at €922.960 billion, 1.4% less than in January 2023. From one period to the next, interest rates in the eurozone have risen by 200 basis points, from 2.5% at the beginning of last year to the 4.5% set by the European Central Bank (ECB) in September, leading to an increase in the cost of financing.

Faced with higher borrowing costs and rising inflation, the granting of loans was reduced by more than €16.361 billion in the case of families and by €12.736 billion in the case of companies. This decline was also observed on a monthly basis, albeit at a more moderate pace. Household borrowing fell by €2.757 billion, 0.4% less than in December, while business borrowing rose by €24 million.

These data were recorded in the midst of the moderation experienced by the twelve-month Euribor, the index to which most mortgages in Spain are referenced, which closed January at 3.609%, its third consecutive monthly fall. In the same month of 2023 it stood at 3.337%. Although far from the highs of 4.1% recorded last summer, the rise in interest rates has caused a slowdown in lending activity in recent months, especially compared to the second half of last year.

The rise in house prices and the use of savings to repay mortgages, which have risen sharply since they were granted free of charge, have caused the outstanding balance of household mortgage loans to continue to fall, to €494.793 billion, down 3%. This is the lowest figure since 2006, when it fell below the €500 billion mark, according to data published by the Bank of Spain. Nevertheless, the amount that families allocate to their homes continues to account for the majority of their debt, at around 73%.

The moderation in the volume of loans earmarked for housing contrasts with consumer financing, which rose by 3.5% to €98.821 billion. At the same time, the balance of bank loans to enterprises fell by 4.4% to €453.641 billion. On the other hand, debt securities remained above 134 billion, while foreign loans rose by 2.2% year-on-year to 335.242 billion.

Original Story: La Información
Edition and translation: Prime Yield

doValue logo

Attica Bank selects doValue Greece to manage a €500 million NPE portfolio

doValue Greece has inked a pivotal servicing contract with Attica Bank SA, marking a significant expansion in its portfolio. The deal, involving the management of Non-Performing Exposures (NPEs) worth approximately €500 million Gross Book Value (GBV), is integrated into a larger decuritized portfolio known as Project Omega, which was reassigned to Attica Bank in February 2024.

Attica Bank, ranking as the fifth-largest banking entity in Greece, provides a comprehensive spectrum of financial services to individuals and SMEs, including deposit, investment, and insurance products. With doValue Greece now managing €30 billion of NPEs, including 7 HAPS securitizations, this transaction further solidifies its standing in the Greek Non-Performing Loan (NPL) market.

Original Story: BNN Breaking | Author: Sakak Costu
Edition: Prime Yield

Coimbra Shutterstock

Salaries aren’t enough to pay mortgages in more than 80% of Portuguese municipalities

Mainland Portugal has only 45 municipalities – less than a fifth – where half the families have the minimum income needed to buy a house on credit. According to data from the Ministry of Economy, the median income in Portugal (1,091 euros) is only enough for half of what is needed to pay the bank: 2,063 euros.

The analysis by the Strategy and Studies Office, quoted by the Jornal de Negócios, also pointed to the difficulties felt not only in the metropolitan areas of Lisbon and Porto, but also in the rest of the mainland.

Along with Lisbon, the Algarve region has seen its housing accessibility deteriorate, and is even the region with the lowest levels of accessibility. In the Central Alentejo, the Beiras and Serra da Estrela concentrate more than a third of the municipalities where most families are able to meet their mortgage instalments.

This housing affordability index compared, at a local level, the median income of families with the monthly effort required to cover a credit instalment plan.

The study concluded that in only 45 of the 278 mainland municipalities (16.18%) does the median income manage to cover the value of the instalments required for the houses – these are mainly concentrated in the interior, except for four municipalities in the Leiria region and two in the Coimbra region. Alentejo Central has the highest number of municipalities with affordability – 10 – with another seven in the Beiras and Serra da Estrela region.

Another reality is found in Vila do Bispo, in the Algarve, the municipality with the worst affordability and where half of the families don’t have enough income to cover even a third of the instalment that would be due on a loan.

Original Story: Executive Digest | Author: Press
Edition and translation: Prime Yield
Photo: Shutterstock

Axios Capital announces R$200 million fund to buy NPL from the rural sector

Axios Capital, a holding company that owns an investment bank, a securitisation company and a business consultancy based in Poços de Caldas (MG), has announced the creation of a fund aimed at negotiating debt in the rural sector based on NPLs (non-performing loans). The fund, called Axios Special Situations I, is starting with an investment of around R$70 million, but the aim is to build up an initial capital of R$200 million.

The assets, backed by rural property guarantees, will be accumulated through the interest of professional investors, individuals and companies, with average contributions of R$10 million per shareholder. Axios is counting on the financial partnership of Stark Investment Bank, based in São Paulo (SP), a digital bank with R$2.5 billion under negotiation and R$600 million in completed transactions, according to the institution.

“Our thesis is to invest in distressed debt with a high degree of asymmetry, with the possibility of buying the assets at a significant discount and with solid coverage,” says Hugo Lopes de Barros, co-founder and CEO of Axios Group. According to the Central Bank, NPLs across all sectors of the economy in Brazil currently exceed R$400 billion in overdue debt.

In its current operations, Axios allocates 70 per cent of its investments to non-performing loans and single names, with guarantees and realisable assets guarantees and realisable equity valued at 150 per cent of the amount invested – which, in its new fund, will be backed by the value of forced sales of rural properties and other assets. The other 30 per cent of investments will normally be used to acquire judicial assets in special situations, distressed real estate assets, distressed real estate assets (i.e. overdue bank loans), credit rights (i.e. overdue bank loans), credit rights, precatórios, pre-precatórios and other lawsuits of this nature, all with final judgements.

Edition and translation: Prime Yield
Original Story: Forbes Brazil
Photo: Axios