NPL&REO News

Credit expanded by 8% in Q1

The Bank of Greece’s (BoG) data for the first quarter of the year confirm the recovery in corporate financing, which will support credit expansion in 2024, as the net flow of financing moved into positive territory in the order of 333 million euros.

The net flow of financing captures new loan disbursements after repayments of existing debt, and the positive sign in the first quarter is a consequence of the increase in borrowing of €1.9 billion in March, which raised the rate of credit expansion to businesses to 8%.

Loans to enterprises amounted to €76.4 bn, of which €67.4 bn are loans to industry, trade, tourism, construction, etc. – i.e. non-financial businesses (NFC) – and a further €8.9 bn are loans to insurance companies. A further €4.5 billion are loans to professionals, farmers and sole traders, which make up a small proportion of business loans. In addition to the high cost of money resulting from the rise in interest rates, the reluctance of sole proprietors and especially the self-employed to borrow is also attributed to widespread tax evasion and undeclared income, with the result that their low income status does not allow them access to bank loans.

According to the BoG’s figures, business lending, with a focus on small and medium-sized enterprises (SME), is the main driver of the acceleration in financing, which is currently being boosted by loans from the Recovery and Resilience Fund (RRF), which ensure low financing costs. According to the banks’ estimates, the rate of credit expansion to businesses will rise to an average of 5% over the three years 2024-2026, a period that coincides with the end of the RRF, whose resources should have been absorbed by August 2026.

On the contrary, loans to households continued to show a negative net financing flow both in March (-€21 million) and in the first quarter (-€201 million). The big problem is mortgages, whose balances are constantly shrinking as repayments exceed new disbursements, resulting in a negative flow of €292 million at the end of the first quarter.

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

NPL increased by €144 million in February to 3.62%

The volume of doubtful loans in February was €42.248 billion, according to the Bank of Spain. In February last year the rate was 3.55%.

Non-performing loans (NPL) granted by all credit institutions to companies and individuals stood at 3.62% in February, barely one hundredth of a percentage point higher than the 3.61% recorded in January, although higher than the 3.55% recorded a year earlier, according to data published by the Bank of Spain.

The volume of doubtful loans in February was €42.248 billion, a figure that has risen by 144 million (+0.34%) compared to January. Compared with a year earlier, the volume of doubtful loans fell by 0.81%, €347 million less.

At the same time as this increase in doubtful loans, there was no change in the total amount of credit granted. In February, banks registered €1.135 billion in loans, barely one million euros less than in January. Moreover, it is €33,494 billion less than in February 2023.

The data broken down by type of institution show that the doubtful assets ratio of all deposit institutions (banks, savings banks and cooperatives) closed January at 3.52%, up from 3.50% the previous month, and also up from 3.46% a year earlier.

The NPL ratio of financial credit institutions stood at 6.59% in the second month of the year, up from 6.53% in January, and also up from 6.04% a year earlier.

According to data from the Bank of Spain, the provisions of all credit institutions rose to €30.026 billion euros in February, an increase of 96 million euros compared with the previous month.

Original Story: Idealista News
Edition and translation: Prime Yield

Gruas

€113 bn in loans to developers: Bank of Spain urges vigilance against brick risk

The Bank of Spain is not letting its guard down. Amid the debate for banks to resume lending to developers, the supervisor calls for “increased monitoring” of the banking sector’s exposure to bricks and mortar. And it puts the loans to companies linked to property development and construction at €113 billion at the end of 2023.

It represents a weight of 8.3% of total bank financing to the private sector (households and companies) in Spain. However, the Bank of Spain remains cautious for two reasons. The first is that most of it is in the form of variable-rate operations (almost 70% of the total), so that at the end of last year these companies would already have largely absorbed the rise in interest rates associated with the ECB’s monetary tightening cycle.

And second, because refinancing risks “appear contained, at least in the short term”. Just over 90% of the bank debt of companies in this real estate sector has a residual maturity of more than one year.

Identifying the accumulation of risks

“It is advisable to strengthen the monitoring of real estate exposures in the banking sector in order to improve the ability to detect the possible accumulation of risks and better measure the impact of their potential materialisation,” the Bank of Spain stresses in its latest Financial Stability Report.

The government wants to speed up the approval process for property developers as a key measure to reduce house prices. Although the banks are cautious and guarantee that they will maintain the criteria for approving loans according to their risk models as a containment dike, according to financial sources. The ghost of the 2008 crisis is still very much on banks’ minds.

In fact, the balance of loans for development and construction has already accumulated a fall of more than 80% from 2008 levels, according to updated data from the Bank of Spain. Since the start of the Cobid crisis, the fall has been 17%, deepening the correction from the 76% plunge recorded between 2008 and 2019.

Uncertainty after the wars

The Bank of Spain identifies the geopolitical situation as the main threat to financial stability, just as Iran attacked Israel this weekend and the shadow of a wider war is spreading across the world. In particular, it points to the risk of continued pressure on commodity, gas and oil prices, which could postpone the reduction in inflation.

“The potential remains for geopolitical tensions to negatively disrupt trade in energy and other commodities – and in commodities more generally – and to trigger sharp falls in the prices of risky financial assets. To the extent that these tensions translate into higher levels of economic uncertainty, their impact on economic activity could be significant,” the regulator warns.

Original Story: Vox Populi | Author: Rubén Sampedro
Edition and translation: Prime Yield

Bank of Greece 1

ECB will let Greece’s big 4 banks to pay dividends

After being urged by Bank of Greece Governor Yannis Stournaras, the European Central Bank (ECB) is reportedly poised to let the country’s Big four banks pay dividends when supervisors take it under consideration in June.

That was reported by POLITICO, citing unnamed Greek banking sources who said the banks will be able to pay out €840 million as the financial institutions have come back to big profitability.

The country’s banks had to be bailed out with €50 billion during a 2010-18 financial and austerity crisis that also saw them under a mountain of bad loans since sold over to collection agencies hounding people to repay.

If approved, it would be the first time in 15 years that bank shareholders could cash in on their investments, another Greek banking source also not identified told Pro Morning Central Banker (MCB) Europe.

National Bank of Greece payouts will be capped at 20-25% of the lenders’ 2023 profits, Piraeus Bank is expected to return 10% of its profit to shareholders, Alpha Bank 20%, and Eurobank 25%, all in line with the banks’ own guidance, the source said.

National Bank of Greece shareholders will have to lower their expectations, as the ECB is only likely to let it pay out 25% of its profits, below the 30% the bank guided for in March.

The payouts of the four systemic lenders will be smaller than for most of their European peers, as the supervisor still has concerns about the quality of their capital. Around 40% of the groups’ capital is in the form of deferred tax credit (DTC), which the ECB sees as lower-quality equity, said Business Daily Greece.

Earlier, Stournas told Yahoo Finance in an interview in Frankfurt – the ECB’s home – that the recovery of Greek banks has to be acknowledged. “It’s the time to allow dividends,” Stournaras said. “This decision and the exact parameters will be taken later in the year — in June.”

“We all know the constraints, but nobody can deny the huge improvement in the NPL (Non-Performing Loan) situation, the profitability situation, the capital metric situation, the liquidity situation,” he said. “The time has come for the supervisors to consider allowing the shareholders of the banks to get some dividend.”

Original Story: The National Herald
Edition: Prime Yield

Greece gets €3.5bn windfall from selling state stakes in big banks

The sale of state stakes in five banks by the end of the year is expected to raise €3.5 bn for Greece, Finance Minister Kostis Hatzidakis told a parliamentary committee.

He said the New Democracy government was focused on “saving Greek deposits as well as Greek businesses and households from a wider collapse and crisis”, even as debt collectors hound those who can’t pay their loans.

Many defaulted during a 2010-18 economic crisis in which Greece received €326 bn in three international bailouts to stave off collapse, with banks receiving €50 bn in rescue packages to stay afloat.

The sale comes after the recovery of the investment grade, the high growth rates and the positive course of most of the main parameters of the economy,” he said, referring to Greece being upgraded to the highest level by most agencies and attracting foreign investors.

Bank of Greece Governor Yannis Stournaras said the sales, together with other proceeds from the Hellenic Financial Stability Fund (HFSF), would total about €53.7 bn.

Earlier, Finance Minister Kostis Hatzidakis told Reuters that “we’ve had very strong interest from many investors and that’s why we’re aiming to complete this process by the end of this year” as Greece recovers.

The state recently sold its stake in three major banks, raising more than €2 bn, with the latest sale of a 27% stake in Piraeus Bank oversubscribed eight times as investors jockeyed for position.

Under an agreement with creditors, Greece has until the end of 2025 to complete the sales, but has decided to move faster. The remaining 18.4% stake in National Bank, the country’s largest lender, and 72% in smaller Attica Bank will be sold this year.

“We found there was no reason to delay, to drag our feet,” said Hatzidakis, as banks have seen deposits return and made big profits after selling off bad loans to debt collectors who hound people to pay back debts even when they can’t.

Original Story: The National Herald
Edition: Prime Yield

Madrid

Spanish mortgage delinquencies rise to 2.6% by end-2023

Mortgage delinquency in Spain has risen to 2.6% at the end of 2023, with an increase of 0.3% compared to the end of 2022, according to data from the Spanish Mortgage Association (AHE) collected by the Bank of Spain.

The Spanish Mortgage Association (AHE) has revealed that delinquencies on loans granted for house purchases reached 2.6% at the end of 2023, compared with 2.3% at the end of 2022, according to data from the Bank of Spain. This increase has added around 900 million euros in doubtful mortgage assets over the year.

Despite this increase, the AHE points out that this rate of doubtful assets is at levels comparable to those observed at the beginning of the financial crisis in 2008, and far from the peak of 6% reached in 2014. The association explains that mortgage lending has historically had one of the lowest default rates due to the “sentimental implications” associated with home ownership.

In contrast, the NPL ratio for real estate activities has shown a slight improvement, standing at 3.0% at the end of 2023. The EHA points out that non-performing loans in this sector currently account for around 10% of non-performing loans in the corporate sector, a significant decrease from the crisis levels of 2011 and 2012.

By 2024, the EHA forecasts that mortgage delinquencies could experience upward adjustments, but the possible reduction in interest rates by the European Central Bank (ECB) could provide relief to households and companies in Spain. The association stresses that this reduction would benefit a large proportion of borrowers, especially those with mortgages that are subject to six-monthly reviews.

In summary, although the improvement in credit quality depends not only on the evolution of interest rates but also on the general health of the economy, mortgage delinquencies are expected to improve next year thanks to possible monetary measures by the ECB.

Original Story: Estrategias de Inversion
Edition and Translation: Prime Yield

NPL pile

Banco Montepio and BPI to sell 200 million in NPL

Banco Montepio and BPI are in the market to sell non-performing loan portfolios with a book value of more than €200 million, according to information gathered by ECO from market sources.

Banco Montepio’s so-called “Zêzere Project”, with a book value of €120 million and launched last week by KPMG, includes two tranches of non-performing loans (NPLs): a secured tranche (with guarantees) worth €57 million, corresponding to 120 individual debtors and another 150 from small and medium-sized enterprises (SMEs), with collateral consisting of real estate valued at around €80 million; and another unsecured tranche worth €63 million of problematic SME loans, 60 per cent of which are insolvent.

BPI, meanwhile, has the “Copper Project”, a toxic loan portfolio worth €85 million, of which 62 million are unsecured loans, 12 million are secured loans and another 11 million are what are known in financial jargon as single names.

None of the banks would comment on the deals.

Original Story: ECO | Author: Alberto Teixeira
Translation and edition: Prime Yield

Default affects 28.6 per cent of families, says CNC

Brazilians were both more indebted and more in arrears between February and March, according to the National Confederation of Trade in Goods, Services and Tourism (CNC).

The proportion of families with overdue bills rose from 77.9 per cent in February to 78.1 per cent in March, according to the Consumer Indebtedness and Default Survey (Peic). However, the result is still lower than a year earlier, in March 2023, when 78.3 per cent of households were in debt.

“This result shows an increased demand for credit by families, taking advantage of lower interest costs,” the CNC said in its release of the study.

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

Delinquency

After five consecutive months of decline, the proportion of consumers with overdue bills rose from 28.1 per cent in February to 28.6 per cent in March. In March, the proportion of households in arrears was higher at 29.4 per cent.

“This increase in arrears is also reflected in the increase in the proportion of families who will not be able to pay their debts, which is the most complex group of defaulters, but with a difference of only 0.1 percentage points and in this case already exceeds the indicator for the same month last year,” the CNC said.

The proportion of families who said they were unable to pay their debts and therefore remained in arrears rose from 11.9 per cent in February to 12.0 per cent in March. The result is still higher than in March 2023, when 11.5 per cent were in this situation.

“In order to increase their disposable income, families have been trying to extend the deadline for paying off their debts. So much so that the time spent in debt reached 7.1 months in March 2023, the highest level since April 2022,” said CNC economist Izis Ferreira in a statement.

Poorer people drive up debt and defaults

From February to March, the increase in debt and defaults was driven by lower income families. In the group with a monthly family income of up to three minimum wages, the proportion of people in debt rose from 79.2 per cent in February to 79.7 per cent in March.

In the lower middle class, with incomes between three and five minimum wages, the proportion of people in debt fell from 79.5 per cent in February to 79.3 per cent in March. In the group earning between five and ten minimum wages, there was a fall from 75.8 per cent to 75.0 per cent. In the group earning more than 10 minimum monthly wages, the share remained stable at 71.4 per cent.

In terms of arrears, the proportion of families in arrears in the group with a monthly family income of up to three minimum wages rose from 35.8 per cent in February to 36.4 per cent in March.

In the lower middle class, with incomes between three and five minimum wages, the proportion of defaulters remained at 26.0 per cent in March, the same as in February. In the group earning between five and ten minimum wages, there was an increase from 20.5 per cent in February to 20.7 per cent in March. In the group earning more than 10 minimum monthly wages, the proportion of defaulters fell from 14.6 per cent to 14.3 per cent.

Original Story: Isto é Dinheiro
Translation and Edition: Prime Yield

Banco de España

Bank of Spain will be supervising servicers

The Bank of Spain will supervise servicers, platforms that manage the recovery and sale of portfolios of non-performing loans (NPL) and real estate assets sold by banks, such as Intrum, Servihabitat, DoValue, Hipoges, Diglo and Lexer. Their competence will come with the regulations being finalised by the government to transpose into national law the 2021/2167 directive approved in 2021 in Europe and which countries had to incorporate before 29 December last, according to sources familiar with the document, as confirmed to elEconomista.es.

The industry has been in favour of the Bank of Spain from the outset because of the nature of the assets managed by the servicers (portfolio of debt and banking assets), although their allocation was not entirely clear.

The reluctance was due to the fact that they are not financial institutions, but the agency already supervises other non-financial companies with functions related to the sector, such as valuers or money transfer companies. The directive regulates a sector that, in Spain as in many other countries, lacks specific and comprehensive regulation.

It aims to establish a common legal framework for credit managers and purchasers of portfolios originated by European banks. Most countries have implemented the Directive, but the early elections in Spain interrupted the process.

The regulation will require credit managers to be authorised in one EU member state and then be able to operate in any other with a European passport, and it will be the supervisors of those countries who will monitor their activities on the portfolios they manage in each market. An official register will be set up for authorised persons.

They will have to comply with certain requirements, such as having a registered office in a Member State, having sound governance systems and adequate internal control mechanisms, or dealing diligently and efficiently with the claims of the holders of the loans they manage.

Doubtful loan portfolios

The competent authorities will have supervisory, investigative and sanctioning powers and may even revoke the authorisation in certain circumstances. Purchasers of portfolios will not be subject to authorisation requirements, but will be subject to certain reporting and other requirements, such as the appointment of a credit manager if they do not perform this function themselves.

For their part, banks will have specific reporting obligations to potential purchasers to enable them to value the portfolios and will have to report to the supervisor on the transactions they undertake. For the customer or creditor, protection will be improved by obliging the purchaser of his debt to notify him of the transfer.

When transposing the Directive, the Member States may apply more ambitious rules than those laid down in the Directive, such as extending its application to portfolios held by operators other than banks, but the tendency in the Member States has been to limit it to portfolios of doubtful debts whose sale or transfer has taken place since 1 January. This application would exclude portfolios of, for example, mortgages or short-term receivables.

Original Story: El Economista | Author: Eva Contreras
Translation and Edition: Prime Yield

Morgan Stanley to sell € 4.8 billion ‘Project Alphabet

Morgan Stanley has been appointed by a Greek liquidator to sell €4.8 billion of loans made by Greek banks that failed during the country’s decade of economic turmoil. 

The deal, dubbed Project Alphabet, comprises three portfolios of mostly non-performing loans (NPLs) from a group of 13 banks that are in the process of being liquidated, according to people familiar with the transaction. The debt includes secured retail loans, secured corporate loans and unsecured transactions, the same sources told Bloomberg News.

Although the deal is in its early stages and subject to change, it is expected to close in the first half of the year.

Original Story: Bloomberg News | Author: Esteban Duarte and Sotiris Nikas
Edition: Prime Yield

Banks increase profitability and capital and improve efficiency in 2023

In 2023, the banking sector became fatter. According to the Bank of Portugal, profits increased due to interest income, and as a result profitability grew, capital was strengthened and the efficiency ratio also improved.

Banking profitability “continued its growth trajectory with return on equity (ROE) standing at 14.8 % in annual terms”, 6.14 percentage points more than in 2022, says the Bank of Portugal in its quarterly analysis of the Portuguese banking system.

This growth reflects the increase in net interest income (the difference between interest paid by customers and interest paid by banks) due to the increase in interest rates by the European Central Bank (ECB) to curb inflation.

Return on assets (ROA) also improved, standing at 1.28% (up 0.59 percentage points).

Although slight, the cost of credit risk increased by 0.16 percentage points to 0.45%, due to the strengthening of credit impairments by the banks.

In the note from the supervisor led by Mário Centeno, for banks as a whole, it is also stated that the cost-to-income ratio (dividing operating expenses by operating income to obtain the cost benefit) improved, falling 13.7% compared to 2022 and standing at 36.9%. The increase in operating income contributed to this, as did the improvement in net interest income.

According to the Bank of Portugal’s note, asset quality also improved. The non-performing loans (NPL) ratio fell 0.2 percentage points to 2.7%, an evolution that reflects not only “the reduction in NPLs” but also “the increase in productive (risk-free) loans”.

In this context, the gross NPL ratio for companies stood at 5% (down 0.8 percentage points), due to the reduction in NPL. In the private segment, the gross NPL ratio remained at 2.4%.

In terms of capital, both the total own funds ratio and the Common Equity Tier 1 (CET1) ratio increased by 0.7% to 19.6% and 17.1% respectively.

The average risk weight also improved, decreasing by 0.6% to 42.7%, due to the importance of the lower risk components in assets.

Original Story: Expresso | Author: Isabel Vicente | Data: 27.03.2024
Edition and translation: Prime Yield

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