NPL&REO News

Greek banks profitable after seven years

28 March, 2023

The first clear signs of recovery in the banking system and its return to healthy organic profitability have emerged from the results for 2022, which will be the first profitable year after the last recapitalization of Greece’s lenders, according to Kathimerini news.

Pending the announcements by the three systemic banks – Alpha, National and Eurobank – of the annual results for 2022 and the positive results announced by Piraeus Bank, the profitability target is being achieved after seven consecutive years of losses. Those losses of the four systemic banks totaled €18.2 billion, as a consequence of the high provisions they had to take in over the previous years to cover bad loans.

However, the full armoring of the banking system, which is called upon to further strengthen its capital by at least 150 basis points (b.p.) in order to reach the European average, has not been completed yet and, as has been pointed out by the most official source – the head of the Single Supervisory Mechanism’s supervisory board Andrea Enria in a recent interview with Kathimerini – the only way forward is to consolidate profitability.

Kathimerini understands the consolidation since 2016 has required accumulated provisions of more than €30 billion and, apart from a short break in 2019, has led to total losses of €9.5 billion in the 2016-2021 period (€18.2 billion since 2015) – which remain on the banks’ balance sheets and are offset against profits for the year.

Only recently did the four systemic banks in total record losses of €1.7 billion and €4.7 billion for the years 2020 and 2021 respectively, so that the cumulative result of the last three years remains strongly negative – over €3 billion – despite the positive 2022 result.

Estimates for 2022 raise profitability to €3.5 billion, but given that this result is also based on extraordinary gains, such as the sale of the card management division that brought in total revenues of €1.2 billion (before taxes for all four systemic banks), but also in significant non-recurring financial income, real profitability remains a key pursuit.

Original Story: Kathimerini | Evegenia Tzortzi
Photo: Site Alpha Bank
Edition: Prime Yield

Greek lenders Eurobank, NBG boosted by higher rates, lower NPL

7 December, 2022

Eurobank and National Bank, Greece’s two largest lenders by market value, were profitable in the first nine months of 2022 as higher rates boosted net interest income.

Eurobank, Greece’s largest lender by market value, reported higher net profit in the nine months of 2022 compared to the same period a year earlier, boosted by stronger net interest, fee and commission income.

The bank reported net earnings of €1.106 billion up from 216 million in the first nine months of 2021. Net profit included gains of €231 million from the spin-off of its merchant acquiring business.

“On a backdrop of economic and geopolitical uncertainties, the Greek economy remains a positive outlier, with a growth rate estimate now at 6% for the year,” said Eurobank’s Chief Executive Fokion Karavias.

He said the bank’s performance exceeded guidance across all lines, with international activities a “steady contributor,” increasing profit by almost 40%.

Improvements in the economy and lower problem loans prompted ratings agency Moody’s to upgrade Greek banks earlier this week.

Eurobank grew net interest income by 8.1% year-on-year in the nine months to 1.1 billion euros, driven by bond income, lending and its international business.

Net fee and commission income rose 21.1% to €395 million, mainly from lending activities, network operations and its cards business.

The bank’s non-performing loan exposure (NPE) ratio fell to 5.6% at the end of September with the stock of bad loans decreasing to €2.4 billion.

Peer National Bank (NBG), Greece’s second-largest by market value, reported lower net earnings in the first nine months of 2022 compared to the same period a year earlier on the back of lower trading income.

NBG, 40 percent owned by the country’s HFSF bank rescue fund, said net earnings from continued operations reached €652 million from €732 million in the first nine months of 2021.

CEO Paul Mylonas said tourism was helping to drive economic growth and revenues were on track to reach a new all-time high while private sector profitability was also helping to cushion the inflationary induced shock to the real economy.

Amid the European Central Bank’s tighter policies, including the tightening of targeted longer-term refinancing operations (TLTRO), NBG’s strong and stable core deposit base and excess liquidity “become a strong comparative advantage,” he said.

NBG’s NPE dropped by about 20 basis points quarter-on-quarter to 5.9% at end-September, already below its 2022 target of about 6%.

Original Story: Ekathimerini |George Georgiopoulos
Photo: Eurobank website
Edition: Prime Yield

Credit card usage rampage reaches 2008 levels

7 December, 2022

Gathering at home with up to seven credit or debit cards is commonplace. With two bank accounts and a mortgage, the arrival of these plastic cards doubles to 88 million circulating throughout Spain in 2022.

The latest data from the Bank of Spain show that credit cards are being used more and more and debit cards less and less. Moreover, many applications or online payments do not allow debit payments.

By June 2022, there were almost 41 million credit cards in Spain, 7% more than in the same period in 2021 and 15% more than in 2008. The figure has been rising since the end of 2018, when the year closed with almost 37 million cards.

Debit falls by almost 3% to 47.5 million cards issued by June 2022, a figure that contrasts with the increase in this type of payment from 2015 onwards.

The Bank of Spain’s report highlights a new attack on revolving cards. An infinite credit at a very high interest rate that the agency has described as “revolving credit comparable to a permanent credit”.

Non-payments

If there are more cards, there is much more use of them. The pandemic already triggered the payment, but now it has tripled compared to 2008. The year 2021 closed with 6.1 million transactions and almost 200 billion euros in transactions. In June 2022 the amount exceeds 100 billion euros. Their use has risen by 23% and the amounts paid out by 25%.

Banks have already stocked up for a possible scenario of defaults. The numbers, for the moment, are not dramatic. Non-performing loans rose by one point in August, to 3.86 %, and the forecast is that it will not go up because the new criteria for loans or mortgages are very hard to dissuade people.

Original Story: El Debate | Chema Rubio
Photo: BBVA website
Translation and edition: Prime Yield

Novo Banco eyers IPO amid plans to stay independent

7 December, 2022

Portugal’s Novo Banco should be ready to seize the opportunity for an initial public offering when markets open up to listings, as it seeks to remain independent, its new CEO Mark Bourke told Reuters.

Analysts have speculated that profit-making Novo Banco, which emerged from the ruins of collapsed Banco Espirito Santo in 2014 and is controlled by U.S. private equity fund Lone Star, could be merged with another lender looking to consolidate its position in Portugal.

But Bourke, who took over in August, said that “Portugal is not like some of the north European countries, which are massively over-banked”, as the five largest players own 80%-85% of the banking assets, a high level of concentration.

Novo Banco is now “a profitable, well-capitalised bank that can actually compete, endure, remain independent in the Portuguese market, and can invest and expand,” he said.

The bank should build on its recovery track record and “be ready when and if the IPO opportunity arises to take advantage of it”, he said.

Bourke, who had been chief financial officer since 2019, would not say where the bank could seek to be listed, although Portuguese companies usually choose Euronext Lisbon.

MASSIVE BAD LOANS CLEAN-UP

Since Lone Star bought its 75% stake in 2017, Novo Banco has focused on de-risking, closing subsidiaries abroad, offloading bad loans and real estate under tough restructuring commitments agreed with Brussels. Portugal’s Resolution Fund has the remaining 25% stake.

Non-performing loans (NPLs) fell to €1.6 billion, or 5% of total credit, in September from 2.2 billion a year earlier. In 2017, its NPLs were 10.1 billion or 28% of total loans.

“The major part of the job is done. But we need to be looking at the European average, which is in the 2.5%-3% range… in the short to medium-term,” Bourke said.

Novo Banco’s nine-month net profit almost tripled to €428 million, citing improved commission income, capital market gains and a steep drop in impairments and provisions.

“This was the seventh straight quarter of profitability. We can generate 80 to 100 bps of capital through underlying profitability a year – that means we control our own destiny,” Bourke said.

Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% due to higher funding costs of senior debt issuance and other factors, NII rose by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.

The average rate of its net interest margin stood at 1.29%, but the impact of the upward repricing of the portfolios should come in the fourth quarter and Novo Banco should end the year “well above 1.5%”, the upper bound of its forecast range, he said.

Original Story: Reuters |Sérgio Gonçalves
Photo: Novo Banco website
Edition: Prime Yield

Finance Minister urges servicers to resolve private debt problem

2 December, 2022

Finance Minister Christos Staikouras urged servicers and other creditors to align their operations with the state towards an efficient and sustainable management of the private debt problem.

One of the government’s priorities since the beginning of its term is the maximum possible effort to address that problem, he said. Speaking in Parliament, Staikouras said that private arrears fell to 63.6% in the first half of 2022 from 70% in 2018, while the Greek private debt as a percentage of GDP fell to 125.5%, down from an European average of 162.5%.

He noted that NPLs fell to 10% of loan portfolios at the end of the first half of 2022, from 44% in 2019, with the help of the “Hercules” program. However, Staikouras stressed that despite a restructuring of banks’ balance sheets, private debt remained high, with NPLs held by banks totaling 15 billion euros and NPLs held by servicers totaling €87 billion.

He noted there was increased interest by civilians seeking a debt settlement through an out-of-court platform and said that he expected all related financial agencies to complete procedures. He stressed, however, that creditors continued rejecting a large volume of debt settlement requests and said there was significant room of improvement in this area.

Original Story: Ekathimerini | Newsroom
Photo: Photo bu Toomas Järvet in FreeImages.com
Edition: Prime Yield

Cajamar reaches an agreement with Hoist in its plan to sell NPL

2 December, 2022

The entity continues with its intention to get rid of difficult-to-collect assets and has found an ally in the Swedish bank fund, which has recently closed similar operations with Banco Sabadell.

In the midst of the debate on what will happen to non-performing loans (NPL) in the face of rising interest rates, banks are starting to sell off their portfolios of doubtful loans. Cajamar has joined this trend and has closed several deals in recent months, the latest of which was with the Swedish fund Hoist, a subsidiary of the bank of the same name and a usual suspect in this type of operation. The portfolio for sale, in which the law firm Uría Menéndez has participated, was christened Mesana and included secured and unsecured loans and foreclosed assets after a foreclosure process (REO, in financial jargon), according to sources consulted by La Información.

With this operation, Cajamar continues the NPL clean-up plan undertaken in recent months. In the presentation of its quarterly results, the entity chaired by Eduardo Baamonde revealed that in September it closed a similar operation for the Ostende portfolio, with a gross book value of 703 million euros, although it did not reveal the name of the purchasing party. This type of sale has led the entity to reduce its NPL portfolio by 310 million euros (-22%).

The buyer of Project Mesane, the value of which has not been disclosed, is the Swedish fund Hoist, a subsidiary of a bank of the same name. It is a regular player in this type of operation and has once again come to the forefront of the sector after having closed a recent operation with Banco Sabadell, in which the Catalan bank opened a competitive process and had KKR as the second interested party. Before the outbreak of the pandemic, Hoist has been interested in similar purchases, such as Banco Santander’s mega-portfolio for the Old Trafford project.

Like the Swedish entity, other institutional investors have also entered the Spanish market. This is the case of Kruk, Axactor and EOS, which last September shared out Caixabank’s largest portfolio of problematic assets after the pandemic. The German company EOS kept most of it, while the other two parts of the portfolio were divided between Axactor and Kruk. The former was awarded the SME debt and the latter, which in previous months had done the same with debts from Cetelem and Carrefour’s finance company, focused on consumer credit debt.

Pending delinquency

The portfolio acquired from Cajamar comprises three types of assets. On the one hand, secured and unsecured loans and, on the other, REOs (real estate owner), which are foreclosed assets after a foreclosure process. The transaction comes amid expectations about what will happen to delinquency rates. Cajamar’s is below the sector average, according to the company’s own data, which shows an improvement compared to recent months, in view of the data compiled up to March by Alvarez & Marsal.

Original Story: La Información | Cristian Reche
Photo:Cajamar Sede Social – website
Translation and Edition: Prime Yield

Portuguese lender Novo Banco almost triples nine-month net profit

1 December, 2022

Portuguese lender Novo Banco’s nine-month net profit almost tripled from a year earlier, the bank said, citing improved commission income, capital market gains and a steep drop in impairments and provisions.

The bank, which emerged from the ruins of collapsed Banco Espirito Santo in 2014, netted €428 million in the nine month’s to Sept. 30, up from €154 million a year earlier.

Novo Banco, 75% owned by U.S. private equity firm Lone Star and 25% by Portugal’s Resolution Fund, said its pretax return on tangible equity (ROTE) rose to 12.4% in September from 11% in June.

It said in a statement the results showed sustainable growth and “ability to generate revenue and capital despite the uncertain macro (economic) background” and high inflation.

Although nine-month net interest income (NII), or earnings on loans minus funding costs, fell 5.6% due to the higher funding cost of senior debt issuance and other factors, NII increased by 2.5% between July and September from the previous three months, benefiting from rate hikes by the European Central Bank.

After a major clean-up of its balance sheet, impairments and provisions fell by 86% to €22.5 million, while non-performing loans(NPL) fell to €1.75 billion, or 5% of total credit, in September from 2.2 billion a year ago

Fees and commissions rose 3.8% to €215.7 million in the nine months, while capital markets results increased 34.5% to €68.2 million.

Novo Banco’s fully loaded Common Equity Tier 1 solvency ratio improved to 12.1% in September, 90 basis points higher than in June.

Original Story: Reuters | Sérgio Gonçalves
Photo: Novo Banco website
Edition: Prime Yield

Alpha Bank reports lower Q3 profit, upbeat for 2023

1 December, 2022

Alpha Bank, Greece’s third-largest lender by market value, reported lower net earnings in July-to-September compared with the second quarter on weaker fees and commissions but stronger net interest income.

Alpha Bank, which is 9% owned by Greece’s HFSF bank rescue fund, reported net earnings of 92.7 million euros versus a net profit of 117.3 million euros in the second quarter.

Alpha Bank delivered nine-month 2022 net earnings of 335.4 million euros after a loss of 2.498 billion in the same period a year earlier.

“This strong performance allows us to upgrade our profitability outlook for 2022 to 7% (from 6%),” Chief Executive Vassilis Psaltis said. “Net interest income increased by 12% quarter-on-quarter, to a large extent driven by loan growth.”

With Greece’s economy projected to expand by 2.0% next year, well above the EU average, the outlook for Alpha is “equally positive,” he said.

Improvements in the economy and lower problem loans prompted ratings agency Moody’s to upgrade Greek banks.

Loan growth and a positive impact from higher interest rates helped Alpha increase its net interest income by 12% to 339 million euros in the third quarter. Net fee and commission income fell 6.2% quarter-on-quarter to 92.9 million euros.

Loan impairment provisions fell 34.7% quarter-on-quarter to 58.3 million euros with the bank’s stock of so-called non-performing exposures (NPEs) in Greece flat at 3.2 billion euros.

Alpha Bank’s NPE ratio at a group level declined 20 basis points from the second quarter to 8.0% with clients’ payment behaviour “relatively resilient despite persistent inflation and higher energy costs,” it said.

Original Story: Ekathimerini | Reuters
Photo: Alpha Bank website
Edition: Prime Yield

Banks aims to sell another 7.5 billion in ‘toxic assets’ this year

30 November, 2022

Banks are looking to get €7.5 billion in debt with defaults off their balance sheets against the clock. There are 16 portfolios of non-performing loans (NPL) for sale on the market, with collateral and without guarantees, the divestment of which would bring to €15.3 billion the problematic assets placed throughout the year if they are awarded, as they hope, before the end of 2022.

To date, some 23 transactions with a nominal value of €7.8 billion have been closed and those that remain open were launched weeks or even months ago, with the expectation of awarding them or closing the agreement for the transfer mostly during the current month, according to market estimates.

The process of “cleaning up” balance sheets picked up speed at the start of the year, compared to the €5-6 billion transacted in each of the financial years 2020 and 2021 due to the return to normality post-Covid, without reaching, in any case, the intensity expected by market operators.

Not seeing the expected boom

The reason is that delinquency remains contained (it stood at 3.86% in August) against the conviction that it would emerge significantly after the lifting of the moratoriums on corporate and household loans and the default on the payment of corporate financing guaranteed by the ICO, activated to help customers cope with the hardship of the pandemic.

Banking forecasts delay the upturn to the second quarter of 2023 and it is presumed manageable unless the economic recession worsens due to the rise in interest rates that the European Central Bank (ECB) finally applies to curb inflation, which is galloping at 10.7% in the eurozone.

Even so, the market is observing “fresher” portfolios or portfolios with less aged doubtful loans, which in the eyes of the experts consulted could reflect the banks’ interest in getting rid of unproductive exposures sooner, and smaller portfolios or portfolios with more unique assets have been presented.

Among the portfolios for sale are some six unsecured NPL operations (consumer credit) with a total nominal value of around €1.9 billion, where BBVA’s “Operación Neila” stands out. Sareb’s “Gas Project” stands out among half a dozen other secured and unsecured portfolios, and some real estate assets (REO) with a total face value of €5 billion. The bad bank’s offer alone includes real estate loans worth €1.262 billion and with 11,000 residential assets as collateral.

In addition, there are three other portfolios of real estate assets worth 350 million, where Unicaja’s “Proyecto Leónidas” stands out. Its value, which exceeds 200 million, represents 10% of the foreclosed assets on the financial institution’s balance sheet.

The largest transactions

Among the operations closed during the year were Sabadell, with the sale to Hoist of a mortgage portfolio with a nominal value of 300 million in the “Cora Project”, and another 40,000 unsecured loans with a nominal value of 832 million to the Zolva fund; and CaixaBank, which transferred €1.100 billion in consumer and SME loans in the “Ordesa Project” to the EOS fund, Axactor and Kruk; and another 750 million in the “Yellowstone Project” to Cerberus, among other operations.

Unicaja disposed of Liberbank’s impaired loans with a nominal value of 307 million in “Project Vector” to Axactor; and Kutxabank transferred 240 million in mortgages with defaults in “Project Puppy” to the EOS fund and Deutsche Bank. Santander, WiZink, ING and Cetelem have been other institutions to put non-performing assets up for sale, where there are also transactions between investors seeking, in some cases, liquidity for other positions once they have extracted the profitability or a margin with their initial recovery.

Although the sector has not yet seen signs of deterioration, it expects it to occur and the Bank of Spain is not missing an opportunity to ask institutions to be prudent in their provisions and capital strategies. Despite the fact that institutions have disposed of damaged assets with a nominal value of more than €155 billion between 2015 and last year, according to the consultancy firm Axis Corporate, they still carry one of the biggest burdens in Europe.

The face value of NPLs on the balance sheet reached 78.9 billion in Spanish banks in June, 21.26% of the 371.1 billion in Europe as a whole. It is the second largest charge after France (109.7 billion) and far behind Italy (51.8 billion) and Germany (30.3 billion), the next in the ranking.

155.9 billion euros

This is the impaired exposure (non-performing loans and foreclosed assets) that Spanish banks have sold between 2015 and 2021 according to estimates by the consultancy firm Axis Corporate.

The entity that would have disinvested more is Santander, to evict €39 billion; followed by CaixaBank (€24.756 billion) and Sabadell (€24.606 billion). The ranking of investors is headed by the Blackstone fund (€32.440 billion), together with Cerberus (€26.813 billion) and Lone Star Funds (€17.070 billion).

Original Story: El Economista |Eva Contreras Photo: Big Stock Photo
Translation and edition: Prime Yield

Banco Montepio reports a 9-month net income of €23.9 million

30 November, 2022

The bank highlights the rise in net interest income and commissions, the reduction of operating costs by €16.1 million and lower appropriations for impairments and provisions of €45.1 million.

Portugal’s Banco Montepio had consolidated net income of €23.9 million in the first nine months of the year, against a loss of €14.2 million in the same period in 2021, according to a release sent to the Securities Markets Commission (CMVM. In a statement, the bank highlights the rise in net interest income and commissions, the reduction of operating costs by €16.1 million and lower appropriations for impairments and provisions of €45.1 million.

“Notwithstanding the increases in mandatory contributions related to the banking sector, the Resolution Fund and the Deposit Guarantee Fund of, in aggregate, €3.2 million,” the bank added.

Consolidated net results for the first nine months of 2022 include, in the third quarter, “an estimated impact of -€22.7 million (after considering non-controlling interests) from the agreement signed for the sale of the stake held by Banco Montepio Group in Finibanco Angola S.A.” Even so, the bank added, “the consolidated net results for the quarter were positive, confirming the favourable trend seen over the last five quarters.”

Banco Montepio also noted the five consecutive quarters with positive net results and the increase in “core banking product” of €7.5 million, as compared to the first nine months of 2021, with net interest income up 1% and commissions up 7% on a year earlier.

Loans to customers (net of impairments) increased to €11.8 billion at the end of the period, 1.5% above the value recorded at the end of December. Customer deposits totalled €12.9 billion, up 1.8% from end-year.

In the statement, Montepio also states that the cost of credit risk stood at 0.1%, down from 0.6% in the period a year earlier.

In terms of operating adjustments, the bank said operating costs had fallen by €16.1 million or 8.5% as a result of lower staff costs, general administrative costs and depreciation and amortisation.

It also mentions the closure of nine branches compared with the same period in 2021 and the reduction in the number of Banco Montepio Group employees by 138 or 3.8% compared with September 30, 2021.

Original Story: Eco News | Lusa
Photo: Banco Montepio website
Edition: Prime Yield

Demand for mortgages flags

30 November, 2022

The first consequences of increased uncertainty in the economy are reflected in Bank of Greece data on financing conditions for the coming quarter, with a decline in demand for housing loans due to a deterioration in consumer confidence.

Findings on demand from the business side point to things moving in the opposite direction, both concerning investment loans and working capital; this is mainly a consequence of the increased need to cover high operating costs, as well as the production gap of Greek businesses.

The opposite trends in the financing of households and businesses recorded in the quarterly BoG data on the conditions of bank financing do show some signs of resilience in the Greek economy: In contrast with the corresponding findings of the European Central Bank, it is found that banks have not tightened credit criteria, which remain unchanged in Greece from the previous quarters. A similar picture emerges from the rejection rate for loan requests, which has not changed substantially compared to previous quarters; most loan rejections concerned consumer and housing loans, while the rejection rates for business loans were low.

In contrast, the deterioration of economic conditions in the eurozone due to the rise in interest rates is more evident in bank credit, since, as the ECB observes, the intensifying fears of a recession and banks’ declining risk tolerance have had a significant impact on the credit criteria for loans to businesses, which were tightened, paving the way for the coming recession.

Declining demand for mortgages is a phenomenon observed across the eurozone, driven by rising inflation and interest rates, which puts pressure on households’ disposable income, affecting home-buying decisions, as opposed to businesses for which rising operating costs create increased working capital needs.

The estimates of the Bank of Greece on the continuation of credit expansion in the last quarter of the year are in line with the data recently presented to Parliament by the president of the Hellenic Bank Association, Alpha Bank Chairman Vassilis Rapanos, based on which bank loans amounted to 17.5 billion euros in January-August and will exceed €20 billion in 2022.

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

Spain’s major banks built up a shield of €50 billion against defaults

29 November, 2022

Spain’s major banks have built up a shield of 50 billion to protect themselves against possible future insolvencies. At the end of September, the five entities listed on the Ibex 35 (Santander, BBVA, CaixaBank, Sabadell and Bankinter) had €49.402 billion in provisions to cover future defaults, which is €1 billion more than at the beginning of the year.

This is also the largest buffer in recent years, even higher than in 2020 (€47.721 billion), the year in which banks made extraordinary billion-dollar provisions in the face of the impact of the Covid-19 pandemic. In fact, although banks have not yet experienced an upturn in defaults (default figures are at their lowest since 2008), they are covered by these provisions made during the pandemic, the bulk of which they have not released, as a precaution.

Even at the onset of the health crisis, banks had high levels of solvency that allowed them to finance families and companies and to apply relief measures to help with repayments. Now, not only are they better capitalised, but they are also more prudent in building up funds to cover possible future losses due to defaults. If in 2019, the year before the pandemic, coverage ratios for bad loans hovered between 50% and 60%, at the end of September this year it was between 60% and 80%. In any case, the sector expects defaults to begin to emerge in the coming quarters and has prepared itself for when the time comes.

Santander has an insolvency fund of €24.813 billion, while stage 3 loans (considered as doubtful) amount to €36 billion. The bank has a coverage ratio of 70%. BBVA is the most risk-averse bank and has provisions to cover practically all doubtful loans. At the end of September it recorded a doubtful balance of €15.162 billion and a fund of €12.570 billion to cover these potential insolvencies. The coverage ratio is 83%, the highest among the main banks.

CaixaBank’s shield against defaults amounts to €7.867 billion. The Catalan entity has a volume of €11.643 billion in doubtful loans, which means that its coverage ratio is 68% (in 2019 it was 55%).

For its part, Sabadell has set aside €3.038 billion to cover possible insolvencies. The bank has a conservative risk policy. It has a strong mortgage business in the United Kingdom through its subsidiary TSB, where loans are well protected and do not run as much risk of default. Sabadell has also been one of the most active banks in the sale of non-performing loans in recent months to clean up its balance sheet.

Bankinter, which has a business model oriented towards medium and high incomes, has traditionally recorded very low levels of non-performing loans. Even so, the bank has €1.114 billion in provisions to cover doubtful loans, which at the end of September amounted to €1.712 billion.

Supervisors call for prudence

Although for the moment non-performing loans (NPL) have not rebounded in Spain, both the Bank of Spain and the European Central Bank (ECB) have been calling for prudence and are monitoring a possible rise NPL in the face of the crisis of high prices and the continuous rises in interest rates to try to curb inflation. “Banks will now start to reassess the need for higher provisions in their portfolios,” said the chairman of the ECB’s supervisory board, Andrea Enria, a few weeks ago in an interview published by the supervisor itself.

For the time being, the situation is under control. During the pandemic, Spanish households accumulated a lot of liquidity, but with inflation running rampant and the cost of money rising due to interest rate hikes, the sector is worried about the rate at which these funds will be burned. To avoid problems, institutions are already looking for measures to mitigate the effects of monetary policy.

In Spain, the two main employers’ associations (AEB and CECA) are negotiating with the Executive to include in the Code of Good Practices measures to help vulnerable families with difficulties in coping with the increase in their mortgage repayments. Similarly, the European Banking Authority (EBA) is monitoring the increase in delinquency. The body wants to avoid at all costs an over-indebtedness of households and that, faced with the credit crunch, families turn to unsupervised financing.

Original Story: Cinco Dias |Newsroom
Photo: BBVA website
Translation and edition: Prime Yield

CGD sees under 1% of clients with “vulnerabilities”

29 November, 2022

Caixa Geral de Depositos SA (CGD) said just under 1% of clients at the Portuguese state-owned bank are significantly vulnerable to rising inflation and interest rates.

“What we see is a little under 1% of our customer base where we do see significant vulnerabilities,” Chief Financial Officer Maria Joao Carioca said at the Bloomberg Portugal Capital Markets Forum in Lisbon. It’s a “relatively comfortable” situation for Caixa Geral at this stage, she said.

Portuguese lenders have been shedding assets and selling soured debt over recent years to reduce their bad loan ratios. The ratio of non-performing loans at Portuguese banks fell to 3.4% at the end of June, according to the Bank of Portugal.

The European Central Bank last week doubled its key interest rate to 1.5% — the highest level in more than a decade. Bank of Portugal Governor Mario Centeno said in February that the impact of a euro-zone interest-rate hike would be quickly felt by Portuguese companies and families as credit in the country is dominated by variable interest rates.

While most mortgages in Portugal are floating rate, “at least in the last periods, we were already originating close to 30% of mortgages with fixed rates,” Banco Comercial Portugues SA CFO Miguel Bragança said at the same event.

Fiscal Discipline

Carioca, who has served as a board member of Euronext NV, said Portugal should maintain a disciplined fiscal policy to ensure that the country’s bond yields remain in line with other major European economies. Portugal’s government forecasts the budget deficit will narrow to 1.9% of gross domestic product this year.

“It’s crucial that we do not see our spreads broadening a lot versus European cores,” said Carioca. “I think we are very well positioned to ensure that.”

Bragança said that Portugal’s ability to cut public debt and fiscal discipline has been crucial for the southern European country to keep borrowing costs low.

“Being able to maintain this discipline will be very important,” he said.

Original Story: Bloomberg| Henrique Almeida and Zoe Schneeweiss
Photo:Edificio sede da CGD
Edition: Prime Yield

Greek banks overlooked but on bumpy road to re-rating – Eurobank Equities

29 November, 2022

Rising interest rates will provide a significant tailwind to Greek bank earnings this year and the next, Eurobank Equities said, rating Alpha Bank, National Bank and Piraeus a “buy”.

In a research report, it said Greek bank shares were “out of sync with fundamentals”, up just 3% so far this year and trading at a steep 25% discount to peers in Europe’s periphery.

“A lot of bad news is priced in and we believe the risk-reward balance is tilted to the upside in the long run, given the ultra-low valuation, a 2023 price-to-book value of 0.3-0.5 times,” the report said.

While a sustained rally is not expected in the near term, given uncertainty over the impact of higher interest rates on economic growth and asset quality, there are factors that will offset global macroeconomic headwinds.

Greek banks will benefit from a new credit cycle following a decade of de-leveraging while rate hikes will boost their net interest income, Eurobank Equities said.

Greece’s economy is also proving resilient thanks to tourism while banks’ asset quality has improved in the last three years.

“Besides their higher sensitivity to rate hikes versus EU peers, Greek banks have additional levers to pull, including continuous cost–cutting and accelerated fee generation,” the report said.

Original Story: Reuters | George Georgiopoulos
Photo: Eurobank website
Edition: Prime Yield

Hercules hits snag from legal loophole

28 November, 2022

The Finance Ministry intends to refer to the Supreme Court Plenary a decision on bad-loan management companies and their competence to carry out auctions, which points to a new and serious problem for the implementation of the “Hercules” loan securitizations.

Given that it will take several months for a decision to be reached on the appeal to the Supreme Court Plenary, the right of servicers to perform acts of forced execution, such as real estate auctions, is called into question. This development, as estimated by representatives of the management companies, will be a strong blow for the securitizations of “Hercules,” which depend to a significant extent on the expected income from real estate liquidations.

To date, the four systemic banks have inducted into the “Hercules” securitization scheme of bad loans amounting to 47.9 billion euros and have received the guarantee of the Greek state for €18.7 billion. The government guarantee means that if the proceeds to be obtained from these loans through the arrangement and liquidations of assets, i.e. auctions, are not sufficient to pay the investors who have invested in the bonds issued under the securitizations, the state will be obliged to cover this damage through the guarantees it has undertaken in the context of the scheme.

The matter of whether servicers have the authority to carry out auctions has arisen in the wake of a recent Supreme Court decision which prohibits real estate auctions by companies acting as trustees of funds that have purchased bad loans under the “Hercules” state guarantee mechanism. The Supreme Court has issued three consecutive decisions on the matter, which have caused no end of confusion, as the first prohibits the relevant right for management companies, unlike the other two which legitimize their right to proceed with real estate auctions.

The confusion has been caused by a legislative loophole existing in the two securitization laws, which allows for different interpretations on the crucial issue of auctions, on which the implementation relies to a significant extent of the business plans for the securitizations that have been included in “Hercules.”

The decision to appeal to the Plenary represents a retreat by the ministry from its original intention to resolve the issue legislatively, by removing the legal loophole.

Original Story: Ekathimerini | Evgenia Tzortzi
Photo: Photo by Jonte Ramos in FreeImages.com
Edition: Prime Yield

NPL break with six months of moderation after the first interest rate hike

28 November, 2022

The NPL ratio rose in August to 3.86%, from 3.85% in the previous month due to the increase in unpaid loans in consumer finance, according to data published by the Bank of Spain.

The default rate on loans granted by Spanish banks in August broke the downward trend it had maintained for the previous six months and did so after the European Central Bank (ECB) raised interest rates for the first time in eleven years in the euro area; and after inflation peaked in Spain at 10.8% in July. Specifically, the NPL rate rose in August to 3.86%, from 3.85% in the previous month due to the increase in unpaid loans in consumer finance, according to data published by the Bank of Spain.

The outstanding loan portfolio at the end of August totaled €1,225 billion, down from 1,233 billion the previous month, while NPL had fallen to 47.237 billion, some 200 million less.

Compared with August of the previous year, NPL fell from 4.43% at that time to 3.86% in August 2022 and the balance of NPL decreased by more than 6.3 billion. In addition to the total data for the sector, the Bank of Spain publishes each month the aggregate NPLs of banks, savings banks and cooperatives (rural banks), on the one hand, and, on the other, those of consumer finance companies.

Thus, although the sector as a whole rose slightly, NPL ratio from banks, savings banks and cooperatives remained at 3.77% in August, exactly the same rate as the previous month. NPL remained unchanged despite the fact that the loan portfolio fell slightly, to 1,174 billion, thanks to the fact that the balance of defaults fell by the same proportion, to 44.343 billion.

In consumer finance, however, the ratio worsened from 6.28% to 6.30%, with a volume of doubtful loans of €2.705 billion, slightly lower than the 2.728 billion in July. The explanation for the rise lies in the fact that the loan portfolio was reduced to a greater extent, to 42.907 billion. As for provisions, or the capital buffer with which institutions face possible impairment or insolvency, they continued to fall in August to €32,981 billion.

Original Story: La Información | Newsroom
Photo:Photo by Victor Iglesias from FreeImages
Translation and edition: Prime Yield

Millennium bcp posted a 63.4% jump in nine-month net profit

28 November, 2022

Portugal’s largest listed bank, Millennium bcp, posted a 63.4% jump in nine-month net profit thanks to a robust rise in core income stemming from policy rate hikes and despite losses at its Polish subsidiary.

The lender netted €97.2 million between January and September, up from €59.5 million a year earlier. Profit in its domestic business more than doubled to €295.7 million.

Its half-owned Polish subsidiary, Bank Millennium, reported a nine-month loss of €270.5 million as it counted the cost of loan repayment holidays imposed on Polish banks in July. r

Millennium bcp benefited from interest rate hikes by the European Central Bank to control inflation, after years of record low rates pressured lenders’ financial margins, and by central banks in other countries where it operates: Poland, Angola and Mozambique.

Millennium bcp’s consolidated net interest income, or earnings on loans minus deposit costs, rose 32.7% to €1.54 billion in the nine months. Its fees and commissions grew 3.7% to €573.8 million.

Chief Executive Miguel Maya said that “performance was supported by a 24.7% increase in the group’s core income and a strict management of operating costs”, but were hampered by results in Poland.

Original Story: Reuters | Sérgio Gonçalves
Photo: Millennium bcp website
Edition: Prime Yield

Novo Banco to reach its NPL’s target by the end of the year, says CEO

7 November, 2022

Novo Banco (NB) should reach its 5% target for non-performing loans (NPL) “this year in a very short space of time”, the financial institution’s CEO believes.

Interviewed on Bloomberg TV, Mark Bourke said that once this goal is met, the second phase will involve reducing the bad debt ratio between 3% and 4%, a figure that will be achieved in two to three years through a “combination of restructuring and sales”.

The development has happened despite the war in Ukraine and rising rates. “If we look at the situation in historical terms, we are still normalising,” the CEO said. And at least for now this normalisation has not yet brought a significant increase in NPL. In Novo Banco and the Portuguese economy “we don’t see a significant rise in NPL formation”, he said. “And this would be a shared experience among banks.”

Asked whether he is aware of contacts by shareholder Lone Star with potential buyers of the bank, Mark Bourke replied with a peremptory “no, absolutely not”, adding however that “shareholders talk to lots of people”. But management’s role is to “prepare the bank and have it in good shape”.

Original Story: Jornal de Negócios |Hugo Neutel
Photo: Novo Banco
Edition and translation: Prime Yield

Resolute acquires Piraeus Real Estate Management in Greece

7 November, 2022

Piraeus Bank SA and Resolute Asset Management Group have reached an agreement for Resolute to provide Piraeus with real estate services in Greece.

In this context, Piraeus Real Estate Management Single Member SA (“PREM”) has been acquired by Resolute Hellas Single Member SA. The agreement refers to real estate servicing, real estate valuation services, and asset and property management of Piraeus’ own-use and non-core properties in Greece.

Piraeus will receive state-of-the-art real estate services, and access to Resolute’s vast experience and expertskills. Resolute Hellas will utilize the specialized know-how of its parent and affiliate companies in the real estate segments, including the market leading technology provided by its technology affiliate, Recognyte, and the advanced agency and property services capabilities of REInvest Greece.

For Piraeus, the transaction is part of its strategy for further cost efficiencies and targeted assets utilization, bringing cost savings of more than €5mn per annum. Resolute Hellas is a fully owned subsidiary of the Resolute Group. Resolute intends to fully integrate PREM’s operations and employees into its Greek activities, with the aim to further consolidate its market leadership in the Greek real estate servicing, asset management and advisory space. The transaction builds on Resolute’s existing long-standing relationship with the Piraeus Bank Group, including the ongoing management of its non-core real estate portfolio in Bulgaria.

Piraeus was advised by UBS Europe SE as financial advisor and Zeya Law Firm as legal counsel. Resolute was advised by KPMG as financial advisor and KG Law Firm as legal counsel.

Original Story: Resolute AM |Press Release
Photo: Resolute Linked In
Edition: Prime Yield

Sareb to cede land to develop up to 15,000 ‘build-to-rent’ units

7 November, 2022

Sareb continues to redefine its strategy. The state-controlled entity will cede land to developers with the aim of encouraging the construction of rental housing throughout Spain. In this sense, Sareb has already launched the process through two tenders to hire financial and legal-fiscal advisors, according to El Confidencial.

The roadmap of the entity controlled by the Frob (Fund for Orderly Bank Restructuring) is to promote through private initiative between 10,000 and 15,000 build-to-rent units throughout Spain, offering a concession period of fifty years. At the end of the concession period, the homes will become part of the public housing stock.

This new Sareb strategy is part of the change of direction carried out by the entity in recent months, following the takeover by the State in the first quarter of the year. The decision was in response to the change in the statistical consideration by Eurostat, which means that Sareb’s losses are now counted as public debt.

As part of Sareb’s new strategy, the so-called bad bank launched Project Gas last August. The entity launched real estate loans valued at 1,262 million euros on the market and gave until September to submit non-binding bids.

Sareb’s deadline was to transfer this portfolio before the end of the year. The portfolio, worth 700 million euros, comes from assets transferred by savings banks with the bursting of the real estate bubble. The bank expected the bids to be discounted by an additional 60 to 70 per cent.

The Gas Project covers some 3,000 loans with 11,000 residential assets as collateral. Of these, there are some 4,800 homes and the rest are garages, storage rooms and land. Most of these are already in the judicial claim phase or in insolvency proceedings. The provinces with the most assets for sale in this portfolio are Valencia (1,997), Almería (1,400), Barcelona (694), Tarragona (671) and Castellón (666).

Original Story: EJE Prime |News
Photo: Sareb Linked In
Edition and translation: Prime Yield