NPL&REO News

Alantra partners with Spanish family office Ion Ion

1 February, 2024

Financial services firm Alantra, which was launched in Spain as N+1 in 2001, has partnered with Spanish family office Ion Ion to support the growth of its European private debt platform, which includes real estate debt funds.

Ion Ion, a leading family office in Spain, is controlled by Jon Riberas, the owner of Spanish automotive company Gestamp. The firm will acquire a strategic equity stake in the Spanish manager’s private debt business by way of a capital increase. Alantra said the deal will boost its financial resources for its expansion across Europe.

As part of the deal, the family office will seed existing and future private debt vehicles including its second real estate debt fund, Alteralia Real Estate Debt II fund. Speaking to Real Estate Capital Europe, Jaime Cano, partner in Alantra’s private debt business, said the outfit has been placed in a holding company under Ion Ion.

This week’s announcement follows the news Alantra has launched Alteralia Real Estate Debt II, targeting €200 million in equity commitments. Cano added the firm will begin fundraising for the fund in the second quarter of the year. It is aiming to hold a first close in Q3 with the aim of raising between €80 million to €100 million, including an unconfirmed volume of capital from Ion Ion.

“Real estate debt is one of the pillars to further grow the private debt platform in Europe, alongside other debt strategies. We are aiming to become one of the leading GPs in the European mid-market space, ” Cano said. “We also aspire to attract large and international LPs/investors to our multi-credit platform with the goal of increasing the assets under management in the short and medium term, ” he added.

“Given the current market conditions, our target net return for real estate debt is within the low teens. Additionally, we are exploring more opportunistic real estate debt transactions through our Credit Opportunities fund, where the target returns are in the mid-teens.”

Through the second fund, the firm will have a Western European focus and will aim to diversify its exposure – which is largely focused on Spain. It will provide loans for acquiring real estate assets, refinancing existing debt, or funding renovation or repositioning works. Ticket sizes will range between €10 million and €30 million, with loan-to-values up to 80 percent.

As well as real estate debt, Alantra’s private debt platform invests in corporate direct lending and midmarket credit opportunities.

Original Story: Real Estate Capital Europe
Author: Mark Mwaungulu
Edition: Prime Yield
Photo: Alantra

Greeks’ overdue debt outsize GDP

1 February, 2024

The overdue debt owed by Greeks to the state and financial institutions – i.e. banks and funds – is more than the country’s gross domestic product, reaching 224.2 billion euros.

These debts are divided between public and private sector entities as follows: €105 billion is owed to the tax authorities, accounting for 47%; €46 billion to social security bodies, representing 21%; €11.7 billion to banks, representing 5%; and €61 billion to funds managed by servicers, an amount that represents 27% of the total overdue private debt.

This amount, which exceeds Greece’s GDP, does not include the current debt of businesses and households, which amounts to €113.2 billion, raising the total amount of debts to €337.4 billion.

The out-of-court mechanism is a key tool for settling overdue debt, and according to data from the General Secretariat for Private Debt Management, 12,025 arrangements had been made for debts to financial institutions and the public for a total of €4.36 billion in initial debts until December 2023.

Last year, successful arrangements and new application submissions reached record numbers, a fact that, according to the Ministry of National Economy, reflects the dynamism of this particular tool that is significantly used by debtors and contributes substantially to the management and reduction of private debt. From the report of the last six months, it stems that an average of 950 arrangements per month are provided through the tool, while the continuous interest is also reflected by the rate of launching new applications on the platform, which exceed 3,500 every month.

Based on the latest progress report for December 2023, €18 billion in debt is on track for settlement. Most applications concern citizens with debts in the range of €50,000-200,000. From the analysis of the arrangements, it appears that 45% of the arrangements for debts to financial institutions receive a haircut of more than 30%, while for debts to the state, the corresponding rate of applications that receive a haircut of more than 30% is 33%.

Original Story: Ekathimerini

Author: Evgenia Tzortzi

Edition: Prime Yield

Photo: Getty Images

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

23 January, 2024

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

Greece plans to start stake sale in Piraeus Bank by March

22 January, 2024

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

DoValue prepares to exit the Portuguese NPL market

22 January, 2024

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

15 January, 2024

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

15 January, 2024

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

Credit expansion of 4% is expected for 2024 and 2025

15 January, 2024

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

9 January, 2024

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

9 January, 2024

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

Hercules 3 to come with stricter regulations

15 December, 2023

The National Economy and Finance Ministry’s plan for “Hercules 3” provides for additional guarantees to banks amounting to €2 billion, and for its extension until the end of 2024.

The aim is to include in the mechanism of bad-loan management at least three more securitizations of loans pending from the four systemic banks, as well as the securitizations of smaller banks, such as of Attica Bank and Pancreta Bank.

The criteria of Hercules 3 will be stricter compared to the first and the second version, as the senior notes, which will be guaranteed by the state and will have to secure a higher investment category – i.e. more chances of collection.

Original Story: Ekathimerini | Evgenia Tzortzi
Photo: Photo by Sergey Klimkin in FreeImages
Edition: Prime Yield

Greece tables draft legislation expanding “Hercules” program to reduce NPL

13 December, 2023

The Greek government has just tabled in Parliament a draft law seeking to further reduce non-performing loans (NPL) in banks’ portfolios by expanding the “Hercules” programme.

The draft legislation envisages measures to introduce greater transparency, more information and respect of debtors’ rights for servicers, modernise an out-of-court mechanism and expand protection for vulnerable debtors, improving the operating framework of a sale and leaseback agency, introducing measures to boost competition, such as loan offering from non-banking agencies, and expanding transactions through the IRIS system.

National Economy and Finance Minister Costis Hatzidakis said that the government’s intervention for banks and loans combined the goal of financial restructuring and the protection of vulnerable debtors with a series of modern and fair solutions. Servicers will operate under new and stricter transparency rules, ensuring debtors are given more information. The out-of-court mechanism becomes simpler, while the expansion of the Hercules programme will operate for the benefit of the banking system. At the same time, competition in the banking system becomes more intense through initiatives such as the ability of non-banking agencies to offer housing and business loans. The Greek economy has proven to be resilient and will move even higher in 2024, while dealing with the outstanding private debt will definitely contribute towards this direction, he said.

The expanded Hercules programme, following an agreement reached with the European Commission, will have a guarantee offer ceiling of up to €2 billion and will last until December 31, 2024. The Greek state has offered guarantees worth €18.7 billion in the previous two phases of the programme, helping to reduce the stock of NPL held by banks from 40.6% in December 2019 to 8.6% in June 2023.

Original Story: Hellenic News of America |HNA
Photo: Photo by Jonte Remos in FreeImages
Edition: Prime Yield

Bank of Portugal imposes capital buffer for mortgages at four large banks

11 December, 2023

The Bank of Portugal has told Millennium bcp, Novo Banco, Banco BPI and the local unit of Spain’s Santander, to create a new capital buffer equivalent to 4% of their loan portfolios that are collateralised by home mortgages.

It said in a statement the measure addressing “sectoral systemic risk” would come into effect on Oct. 1, 2024, and be reviewed at least every two years.

“This instrument has a preventative nature and aims to increase the resilience of institutions in the face of a potential future materialisation of systemic risk in the residential real estate market in Portugal,” it said.

The central bank said the four banks, which account for 61% of total home loans, were using internal ratings-based approach to calculate risk-weighted assets, which leads to lower evaluations than those of banks using the standard method.

BPI is owned by Spain’s Caixabank and Novo Banco by the U.S. fund Lone Star.

According to central bank data, all lenders in Portugal brought total non-performing loans (NPLs) down to €9.69 billion, or 3.1% of total credit, in June from the peak of 17.9% in June 2016.

The NPL ratio of loans to individuals was just 2.4% in June, despite rising interest rates and high inflation.

Original Story: Reuters |Staff
Photo: Bank of Portugal headquarters
Edition: Prime Yield

Housing costs in Greece are the highest in Europe

11 December, 2023

Greece has a negative lead in Europe on the income-housing costs ratio, with 27% of the Greek population spending more than 40% of their disposable income to cover housing costs. November’s Financial Stability Report by the Bank of Greece (BoG) attributed the country’s position to its low per capita income compared to the rest of Europe.

According to the report, Greece also ranked first in terms of housing costs. The figures, reported by Nafteboriki, show that:

– Apartment prices (in nominal terms) rose by 13.9% in the second quarter of 2023, year-on-year, compared to an increase of 11.8% in 2022.
– Prices of new apartments (up to 5 years old) increased at an average annual rate of 13.8%, in the second quarter of 2023, while prices of old apartments rose by 14.1%.
– In terms of geographic region, the prices in the country’s major urban centers rose significantly and more specifically in Thessaloniki (16.4%) and other major cities (14.6%), which exceeded the corresponding average growth rate for the entire country.

In the short term, foreign investment interest will persist, especially in privileged locations in the Attica basin and tourist areas. According to the BoG, expectations for the Greek residential real estate market remain positive, despite the uncertainties in the domestic and global economy.

Original Story: Ekathimerini |Staff
Photo: Photo by Takis Kolokotronis in FreeImages
Edition: Prime Yield

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