NPL&REO News

Greece gets €1.07 billion from the sale of 22% of the National Bank

6 December, 2023

Greece has secured revenues of €1.066 billion from the disposal of 22% of National Bank, a process oversubscribed eight times.

As Minister of National Economy and Finance Kostis Hatzidakis underlined, this is the “most successful transaction in the last three years in the EU in terms of the demand manifested and the minimization of the discount on the offering price,” set at €5.30 per share from a provisional price range of €5-5.44. Demand for the HFSF shares at National exceeded all expectations, reaching 9.5 times for the international book and 2.2 times for the Greek book. The shares immediately attracted very strong interest from leading international institutional investors, with a total of more than €30 trillion of funds under management.

As the HFSF bank bailout fund noted, “several of them have included a Greek bank in their portfolio for the first time, or again after many years.”

The participation of long-term investors covered more than half of the demand and according to data from the share allocation, among the big investment houses taking positions in National Bank are Fidelity, BlackRock, Capital, Allianz and Lazard.

The president of the HFSF, Andreas Verykios, thanked the international and Greek investment public “for the high response to the public offer,” which, as the managing director of the HFSF, Ilias Xirouhakis, stated, is “a resounding vote of confidence from the markets in the prospects of the Greek financial system and the growing dynamics of the Greek economy.”

At the same time, “it is recognition at an international level of the fund’s contribution to the recovery of the banking sector and to the consolidation of a climate of investment confidence in our country.”

That was also acknowledged by Bank of Greece Governor Yannis Stournaras, who contacted the management of HFSF, and those of National and Alpha, whom he congratulated for the successful moves in the privatization of the two banks. In total, from the two privatizations, of National and Alpha, the state will collect €1.36 billion.

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

Lower-income households suffer twice as many mortgage delinquencies as richer households

6 December, 2023

Mortgage delinquency remains contained, despite the brutal rise in the Euribor caused by the European Central Bank (ECB) raising official interest rates to combat high inflation. Home-purchase loans, the Bank of Spain reminds, are the last thing people stop paying: they dip into savings and benefits and do not stop paying the instalments for two years on average after they have suffered a significant drop in income, usually due to job loss. This explains why NPLs are at low levels in historical comparison, far from the peak of 6.28% in March 2014, despite rising slightly from 2.33% of the mortgage balance in March to 2.44% in June. But this reality hides notable differences: lower-income households have twice as high a default rate as wealthier families.

According to data from the Bank of Spain, the 20% of households with the lowest gross income (less than 26,695.09 euros per year) recorded a fall in their mortgage delinquency from 3.69% in December 2021 (when the ECB began to tighten monetary policy) to 3.27% last June. But despite the decline, they have a default rate that is double that of the 20% of households with the highest income (more than 40,775.85 euros per year), in which it fell from 1.99% to 1.63%. The data thus confirm the intuitive fact that the lower the income, the more payment difficulties: 3.12% of households with an annual income of between 26,695.09 and 30,735.5 euros, 2.86% of households with an annual income of between 30,735.5 and 34,728.27 euros, and 2.44% of households with an annual income of between 34,728.27 and 40,775.85 euros are in arrears.

All groups of families have seen their average monthly mortgage repayments rise by between 19% and 21% from the end of 2021 to last June, from 453 to 542 euros in the case of the lowest incomes and from 716 to 869 euros in the case of the highest incomes. However, the impact of these increases on family finances has been uneven depending on their economic level. Mortgage repayments have gone from absorbing 23.22% of the gross income of the lowest-income households in December 2021 to 26.23% last June, while in the wealthiest families the rise has been from 17.14% to 19.66%. In other words, it is confirmed that the richer the household, the more margin it has to meet the rest of its expenses once the mortgage has been paid.

VULNERABILITY INDICATORS

The data also show that the weight of mortgage payments in the income of all groups of households is below the threshold considered “prudent” (less than 30%). The Bank of Spain has not detected “alarm signals” in this variable across the board. However, as this is an average, it implies that there are families with mortgages above this level. And bearing in mind that households with lower incomes are those with a rate closer to the barrier (26.23% compared to 30%), it is foreseeable that in this group there is a greater number of families in a more vulnerable financial situation and with a higher risk of defaulting.

Another indicator in the same direction: the 40% of lower-income households only account for around 11% of the total balance of mortgage loans, due to their lower access to loans because of their lower level of savings to pay the down payment (banks normally require the buyer to contribute 20% of the value of the property), as well as the lower price of the properties they can afford to buy. However, their weight in the nearly 11,000 million euros of doubtful mortgages (defaults of more than 90 days or other subjective characteristics that make non-payment likely) is 16%, higher than what would correspond to them according to their weight in total credit.

This greater financial weakness makes low-income households more vulnerable to the “expected deterioration in credit quality” (i.e. an increase in non-performing loans) that the Bank of Spain foresees. In its recent financial stability report, it noted that the “favourable evolution of the labour market and economic activity, together with moderating inflation, has translated into a notable recovery in household incomes in the first half of the year”. This is what explains why mortgage delinquency has continued to fall. However, it also warned that, although the average mortgage balance rate has already risen from 1.1% at the end of 2021 to 3.5% in September, “a greater pass-through of the increase in (benchmark) interest rates to the cost of households’ outstanding debt is to be expected, which would contribute to an increase in the proportion of indebted households with a high financial burden”.

The institution estimated that just under a third of variable-rate mortgages still have to face a revision of more than one percentage point (plus the differential fixed in the contracts) between June 2023 and June 2024. And it warned that a rise of five percentage points in the Euribor (somewhat higher than that recorded since December 2021), fully passed on to credit, could increase the number of indebted households in a vulnerable situation (interest payments exceeding 40% of income) to represent 14.6% of the total (1.63 million families).

Original Story: Activos |Pablo Allendesalazar
Photo: Photo by Blues57 in FreeImages
Translation: Prime Yield

BCP puts a €80 million NPL and REO portfolio for sale

6 December, 2023

The sale is part of the bank’s normalisation plan, which had profits of €650.7 million by September.

BCP has put a new portfolio of problematic assets on the market with a book value of €80 million, according to Eco.

The “Grace project” includes around €64 million in guaranteed non-performing loans (NPL) and €15 million euros in real estate assets (REO), according to sources contacted by the newspaper.

The sale is part of the bank’s normalisation plan, which had profits of €651 million by September.

The aim is to cleanse the balance sheet of problematic assets. The digital newspaper explains that in September BCP had €790 million in NPL and a further €1.23 billion in non-performing assets (NPE), a reduction of almost €400 million year-on-year, partly due to the sale of the ECS funds at the end of 2022, a portfolio of luxury hotels and other properties.

The NPE ratio fell from 3.7% to 3%, and the chairman, Miguel Maya, ruled out any problem with a systemic dimension in a context of rising interest rates.

Original Story: Jornal de Negócios |Negócios
Photo: Millennium bcp website
Edition and translation: Prime Yield

Bank’s NPL ratio remains at 3.56% in September

4 December, 2023

The nonperforming loans (NPLs) ratio of Spanish banks to the private sector remained at 3.56% in September, unchanged from the previous month, according to the lates data published by the Bank of Spain (BdE).

The ratio stood at 3.50% in June and July, before rising by 6 basis points in August, which it maintained in September. However, it is still below the 3.79% reached a year ago, in September 2022. In monetary terms, doubtful loans amounted to €42.081 billion, the third lowest figure of the year.

This figure has been on a downward trend so far in 2023, as it closed last year at €43.159 billion and has not reached the €43 billion mark since. This year’s low was recorded in July, at €41.754 billion.

Looking at the breakdown by type of business, financial institutions (banks, savings banks and credit cooperatives) reached a NPL ratio of 3.44% in September, after a decrease of 1 basis point in the last month. A year earlier, the ratio was 3.70%.

As for financial credit institutions, NPL reached 6.74% of the total, up from 6.47% in August and 6.29% in September 2022.

Original Story: Ecobolsa | News
Photo: Photo by Xexo_Xeperti in FreeImages
Edition and translation: Prime Yield

IMF advises banks in Portugal to ‘cushion’ bad loans with profit growth

4 December, 2023

The International Monetary Fund (IMF) is advising Portuguese banks to avoid ploughing all of their rising profits into dividends, instead calling for a strengthening of capital reserves as a “cushion” against a possible rise in bad debts and bankruptcies.

“Banks need to be capitalised, including Portuguese banks, and we suggest that in the current phase banks increase their own funds and capital reserves and refrain, as far as possible, from paying out all of the increase in profits in dividends,” said the IMF’s European director, Alfred Kammer, at a meeting with European journalists in Brussels.

At a time when banks such as BCP, Novobanco, Santander Totta and BPI have almost doubled their profits in the first nine months of the year compared to the same period last year, the IMF’s regional director warns that “times are going to get tougher” and that “additional buffers” are needed.

“As a result of the post-pandemic adjustment, we’re going to see an increase in bankruptcies, we’re going to see an increase in non-performing loans, and that’s all over Europe, it’s not a specific problem for Portugal,” he adds.

According to Alfred Kammer, this is a “normal” situation given the tight monetary policy with high interest rates, now stabilised by the European Central Bank, which is making access to finance more difficult and causing families and companies to pay more for their loans, especially housing loans.

“These upside risks are normal, […] but we also advise the Portuguese authorities to increase their systemic capital reserves to prepare for an increase in non-performing loans and bankruptcies,” he adds.

He warns that “as financial conditions tighten, financial tensions may emerge”, so “countries should closely monitor banks’ credit quality, leverage and liquidity risks, and increase capital reserves”.

The Regional Economic Outlook for Europe states that “although the European banking system has high levels of solvency and liquidity, banks in some countries hold substantial securities that could lead to a significant depletion of their own funds”.

This is the case in Portugal, which has one of the highest levels of variable-rate mortgages in Europe.

Nevertheless, Alfred Kammer is optimistic about the Portuguese economy, noting that “Portugal has had strong growth, reflecting the recovery in tourism” and also “efforts” to combat unemployment and invest in education.

“I think this is also reflected in our positive forecast for Portugal,” he adds, alluding to the fact that Portugal’s figures are better than those of the eurozone.

“Portugal has been very determined in the last three years to create buffers […] and that is certainly reflected in the positive assessment for Portugal and that makes us generally optimistic for growth in Portugal in the medium term, but of course in the short term it is suffering at the same time a slowdown in Europe […] and that is also reflected in our figures,” says Alfred Kammer.

The IMF expects the Portuguese economy to grow by 2.3 per cent this year and 1.5 per cent in 2024, with inflation falling to 5.3 per cent in 2023 and 3.4 per cent in 2024.

Original Story: CNN Portugal | Lusa /AM
Photo: IMF – Facebook
Translation and edition: Prime Yield

Greece to sell Alpha Bank Stake to UniCredit

4 December, 2023

Greece is pressing ahead with a plan to sell its stakes in the country’s banks, in a sign the financial industry is returning to normal after a decade-long debt crisis.

The country’s Hellenic Financial Stability Fund has agreed to sell a 9% stake in Alpha Bank to UniCredit SpA. It is also starting a process to divest a 20% holding in National Bank of Greece, a lender of which it owns about 40%.

The HFSF, a bank bailout fund that holds the government’s stakes, has said it wants to exit all holdings in the country’s lenders by the end of 2025. It also owns stakes in Piraeus Bank and Attica Bank.

The move comes after Greece regained its investment grade credit rating at firms including S&P Global Ratings after more than a decade. At the same time, the country’s lenders have significantly cut the amount of bad loans accumulated during the debt crisis, which shaved around a quarter off the country’s GDP. Non-performing loans (NPL) now make up 5.7% of the credit portfolio of Greece’s biggest banks combined, down from 33% three years ago.

The sales announced now follow the divestment from Eurobank Ergasias Services and Holdings SA last month, with the lender repurchasing the shares from state.

Original Story: BNN Bloomberg | Sotiris Nikas and Paul Tugwell
Photo: Alpha Bank website
Edition: Prime Yield

Marathon puts its toxic assets in Spain up for sale: €1.2 billion from Santander and Ibercaja

1 December, 2023

The opportunistic fund decided to reduce its exposure to the country following the closure of a fund. It had bought corporate loans with real estate exposure.

The Marathon fund, one of the largest opportunistic investors, wants to get rid of a large part of its assets in Spain. This investor has given a sale mandate to Alantra to transfer all the problem loans and real estate assets it has bought in recent years, valued at more than €1.2 billion, according to financial sources consulted by this newspaper.

Original Story: El Confidencial | Jorge Zuloaga
Photo: Ibercaja – Facebook
Edition and translation: Prime Yield

Five contenders in the race for the bad debt deal of the year in Portugal

1 December, 2023

LX Partners has put €4.2 billion euros of non-performing loans (NPL) and the servicer Algebra up for sale. It’s the deal of the year in Portugal and there are five interested parties.

The NPL of the year in Portugal has attracted five bidders, according to information obtained by ECO from two market sources.

The consortium formed by Cerberus/Intrum/FS, Balbec, Carval, LCM and Bain has submitted non-binding proposals for the purchase of the €4.2 billion of problematic loans and the Algebra platform, which is also part of the deal.

LX Partners has put its entire NPL business in Portugal up for sale in a process codenamed “Projeto Cascais” and led by KPMG.

At stake are NPL that the fund has purchased from Portuguese banks in recent years. Out of a gross value of €4.2 billion, approximately €4 bilion are unsecured loans and another €200 million are secured loans. The deal also includes the servicer responsible for managing this portfolio, Algebra Capital.

LX Partners is an investor focused on distressed debt and NPLs, private equity and real estate. In Portugal, in addition to the NPL business, it owns Five Credit (a digital platform for alternative loans for SMEs), the management company Circle Capital and invested €125 million in Smart Studios (studios for students) in 2018.

The “Cascais Project” can be considered the biggest of this year, which has been marked by a strong cooling of the market. The few portfolios that have entered the market this year are small in value, rarely exceeding €100 million. One of the largest cases is that of Banco Montepio, which has a portfolio of distressed assets valued at around €230 million, including, among other things, ongoing debt and cash in court.

The main reason for this cooling is the “big clean-up” that the banks have carried out in recent years. Five years ago, the banking system was faced with €31.8 billion of NPLs, equivalent to 13.6% of total loans. By the end of June, the ratio had fallen to 3.1%, below the “magic number” of 5%, totalling €9.7 billion, according to the latest data from the Bank of Portugal. Net of write-downs, NPLs totalled €4.2 billion.

Original story: ECO |Alberto Teixeira
Photo: Hugo Humberto Plácido da Silva on FreeImages
Edition and translation: Prime Yield

New housing loans decline

1 December, 2023

Rising interest rates seriously hurt mortgage credit, affecting both the demand and supply for mortgages. This stems from the figures of the Bank of Greece, based on which mortgage disbursements fell in the second quarter of 2023 by 10.7%, while in the same period the number of loans granted showed a greater decline of 12.4%.

Loan disbursements fell from €270.3 million to €241.5 million, while the number of loan contracts signed was reduced from 3,535 to 3,097.

The picture at the six-month level is not particularly differentiated, as despite the marginal increase of 1.8% in disbursements to €507.8 million from €498.7 million in the first half of 2022, the number of housing contracts signed decreased marginally to 6,578 in the first half of 2023 from 6,596 in the corresponding period last year.

As BoG notes in its recent financial stability report, disbursements remain low both in absolute terms and in comparison to the pre-global financial crisis level.

The decline in demand is a result of household anxiety over rising interest rates, which increase the cost of servicing their debt obligations, and rising house prices, which make it almost prohibitive to attract middle-income buyers.

The banks’ policy was not accompanied by a relaxation of credit criteria, which is confirmed by the fact that the weighted average loan-to-property ratio fell in the second quarter of the year to 61.4% from 63.1% in the corresponding period last year.

This means that those who resorted to borrowing to buy a home had available equity of 39.6% of the value of the property they purchased. Accordingly, the weighted average loan-to-income ratio stood at 3.5, indicating that the total amount of loans secured by residential real estate is almost 3.5 times higher than the annual disposable income of borrowers.

From the third quarter of the year, it is expected that the My Home program will have benefited the housing loan market, having gathered strong interest with the submission of approximately 40,000 applications since its introduction in April.

Original Story: Ekathimerini | Evgenia Tzortzi
Photo: Photo by Svilen Milev in FreeImages
Edition: Prime Yield

Eurobank posts lower profit up to September on higher provisions

30 November, 2023

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

30 November, 2023

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

30 November, 2023

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

29 November, 2023

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

Positive outlook for the Greek banking sector

28 November, 2023

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

28 November, 2023

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

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

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

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

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