NPL&REO News

BES’ bankruptcy already cost over €5billion to Portugal and is still counting

18 March, 2019

Since 2014, following the Portuguese government decision to shut down the broke Banco Espírito Santo and thus creating a new bank (Novo Banco) to protect its clients, this process has already cost over €5 billion to public purse. And that amount is still on the rise, due to the bank’s recapitalization needs.

Over the last five years, Portugal’s Government have already injected €6.9 billion from the public money, although €3.9 billion came from a loan provided through the Resolution Fund.

After several efforts to sell the bank, in 2016 the US investment fund Lone Star acquired 75% of Novo Banco (with the Resolution Fund keeping 25%). However, the deal was that new owner would invest €1 billion in the bank’s capitalization instead of paying any price for it.

Under this agreement, was created a compensation mechanism for eight years and up to €3.8 billion from the Resolution Fund to fund for any loses caused by former toxic assets. Later, in 2017 the bank received €792 million from the Resolution Fund, of which €430 million from a public loan. And, in the end of February 2019 the bank requested another €1.149 billion.

At the end of the day, Portuguese coffers have lost €4.692 billion in capitalising Novo Banco, a sum which can rise to €5.841 billion if the new request is accepted.

But Portugal’s Finance Minister Mário Centeno has already said Novo Banco will get «not one euro» extra of public money, because the Resolution Fund loan will be paid in 30 years. «This recapitalisation will be made, once again, through a public loan but that does not mean the state is giving money to the bank», he explained to TV chanel RTP3.

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

Bain Capital raises €1.25 billion fund to purchase European Bank Loans

18 March, 2019

Bain Capital’s credit arm raised 1.25 billion euros for a new fund to purchase European bank loans, according to information given to Bloomberg by a person familiar with the matter.

Bain Capital Credit’s new Special Situations Europe fund will target banks’ secured debt, non-performing loan portfolios and real estate assets, said the person, who asked not to be named because the information isn’t public. The money raised for the fund, the first dedicated to European soured loans at Bain, exceeded an initial target of €1 billion, the person said.

Bloomberg contacted an external spokeswoman for Bain, who declined to comment on the matter.

Last year alone, Bain acquired nine bank loan portfolios across Europe, in Greece, Italy, Portugal and Spain, with a gross book value of more than €4 billion, revealed the same source. Bain Capital has $105 billion in asset under management, according to its website.

European lenders’ efforts to clean up their balance sheets since the global financial crisis have created a burgeoning market for trading non-performing loan exposures.

While more than a third below their peak, Italian lenders still had €222 euros of NPL on their books as of June, according to PricewaterhouseCoopers data. Greek lenders are also seeking to slash €89 billion of bad debt from their books, equivalent to about half of the country’s annual economic output.

Original Story:Bloomberg | Luca Casiraghi
Photo: Bain Capital
Edition:Prime Yield

Growing number of hedge funds are moving into shipping debt

18 March, 2019

There is a growing number of hedge funds moving into shipping debt, an asset class few have invested in before, looking to buy up loans and bonds as banks cut their exposure to the troubled sector, Reuters says.

World economy worries and cost pressures are dampening prospects for a proper recovery in many segments of the shipping sector that, as Reuters highlighted, has struggled with tough markets for a decade.

Meanwhile, European banks, particularly German lenders, are trying to offload distressed and performing loans to the industry which attracts high capital requirements.

And the European Central Bank’s banking supervisor has flagged troubled non-performing loans (NPL) in 2019 as «a concern for a significant number of euro area institutions».

Hedge funds clocked up hundreds of millions of dollars in losses from investments in mainly equities when the shipping industry first turned sour a decade ago – and have made limited forays for the most part since.

Last year some equity-focused funds bet on a recovery for the global shipping industry through the stock and futures markets, but many are now retrenching after heavy losses in the fourth quarter.

Debt-focused funds are hoping for more luck.

Hedge funds looking at distressed loans include York Capital Management and Cross Ocean Partners, the sources consulted by Reuters said.

One deal expected to generate hedge fund interest include a portfolio of distressed shipping loans that Greece’s Piraeus Bank is seeking to sell, finance sources said.

A source close to the Piraeus Bank deal said Reuters the portfolio of shipping loans, called Nemo, was made up of non-performing and performing loans with a nominal value of 500 million to 600 million euros. The source said a sale was expected to close in the second quarter of 2019, declining to provide any details on potential bidders.

Original Story: Reuters | Jonathan Saul, Maya Keidan
Photo: FreeImages.com/Magda S
Edition:Prime Yield

NPL secondary market gain momentum in Portugal, says EU

8 March, 2019

Although its nonperforming loan (NPL) ratio remains high, over the last few months there has been a considerable reduction in Portugal’s bad debt stockpile «as the secondary market gains momentum», says the European Union (EU) on its «Country Report Portugal 2019».

«Portugal continues to correct its macroeconomic imbalances. Although all main indicators are moving in the right direction, public and private sector debt and foreign debt are still significantly above the benchmarks set», says the report, adding that «This continues to have a negative impact on the country’s external position, where the pace of adjustment is expected to slow down».

According to this document, Portugal has made some progress in increasing the quality of its financial system, namely by increasing the efficiency of insolvency and recovery proceedings, reducing impediments to the secondary market for the resale of nonperforming loans, and improving access to finance for businesses.

«While the ratio of non-performing loans remains high, there has been a considerable reduction as the secondary market gains momentum», says the same document, adding that «Portuguese banks have steadily decreased their stocks of non-performing loans and non-performing loan ratios in line with guidance from the Single Supervisory Mechanism» and that «lenders either work out bad debts internally, jointly through a servicing platform or increasingly put them up for sale on the secondary market».

So, adds the EU, «as the Portuguese property market is experiencing a strong period of growth, the secondary market for non-performing loans (often backed by real estate) is becoming increasingly competitive, with many foreign players actively looking to purchase nonperforming assets».

In 2017, the total value of NPL secondary market transactions reached about €2.3 billion, but given the strong pipeline of new deals, «this figure is set to be surpassed in 2018», forecasts the EU.

Highlighting that «the decline in nonperforming loans (or ‘bad’ loans) along with the improved profitability is reducing the balance of risks in the banking sector», the documents also notes that the «aggregate NPL fell by roughly one third over the last two years», thanks mainly to the NPL disposal programmes.

Story: Prime Yield
Photo:FreeImages.com/Armindo Caetano

Novo Banco plans to sell even more NPL in 2019

7 March, 2019

Portugal’s Novo Banco will maintain the efforts towards the reduction of its nonperforming loans (NPL) stockpile along this year, preparing to launch soon the bidding process for another two bad debt portfolios: the projects “Nata 2” and “Viriato 2”.

«Yes, our aim is to close more NPL sales this year», said Novo Banco President, António Ramalho, during the bank’s annual results presentation.

These portfolios arrive into the market a pair of months after the sales completion of projects “Nata” and “Viriato”, which took place in the end of 2018. The larger NPL portfolio to be sold in Portugal ever, Project Nata was divided into two tranches: one with a gross book value of €500 million and other, larger, of €1.2 billion. Besides this, in the same period, the Portuguese bank have also sold its Project Viriato, involving more than 9,000 real estate owned (REO) assets.

Considering the «success» of these «toxic assets» sales, António Ramalho announced that «Yes, we will have the Nata 2 and the Viriato 2», ensuring that this will be another year for the bad debt shrinking.

«We have to do a very clear and precise NPL plan and deliver it to ECB. Its part of our programme», explained the president of the bank which was bought by US’s Lone Star in 2017 after former Banco Espírito Santo collapse in 2014. The goal, stresses António Ramalho, is that «the bank’s NPL ratio reach 5%», in line with ECB’s targets. As for the «bad bank» in which remains the burden legacy of Banco Espírito Santo, the NPL ratio should stand «close to 12%».

As revealed in the same occasion, Novo Bank recorded losses of €1.412 billion in 2018.

Original Story:Jornal de Negócios | Rita Atalaia
Photo: Novo Banco
Translation and Edition: Prime Yield

Mortgage concession boosts up to €10 billion in 2018

7 March, 2019

The mortgage concession boosted in Portugal along 2018, reaching almost €10 billion and hitting an eight-year high, informed Banco de Portugal (the Portuguese Central Bank).

According to the entity led by Carlos Costa, in December the national banks granted €903 million for mortgage loans, alone. This is the highest value registered over the past five months, with the total volume of mortgages granted in 2018 rising to €9.835 billion.

The figure represents a new high since 2010, the year before the Portuguese bailout, confirming an upward trend on mortgage concession over the last few months, reflecting an annual growth 19% in 2018 vis-à-vis 2017.

Original Story: Eco | Eco News
Photo: FreeImages.com/Miguel Saavedra
Edition:Prime Yield

European Commission warns Italy, Cyprus and Greece over high debt and bad loans

7 March, 2019

Italy, Cyprus and Greece are all experiencing «excessive» imbalances in their economies because of high debt and the number of nonperforming loans on their bank balance sheets, the European Commission (EC) said last February 27^th.

Brussels issued the warning as part of its European Semester Winter Package, which scrutinizes the economies of EU countries. The package serves as a basis for further talks between Brussels and the bloc’s capitals about their reform targets and whether their spending plans respect EU rules.

According to this report, Bulgaria, France, Croatia, Germany, Ireland, the Netherlands, Romania, Portugal, Spain and Sweden are also experiencing some economic imbalances, albeit less serious than Cyprus, Greece and Italy.

Commission concerns about high public debt were the common theme in this package, amid consistent warning that the EU is facing an economic slowdown in the near future. Earlier, in February, the Commission downgraded its growth forecast for the single currency bloc in 2019 and 2020 thanks to global trade tensions and China’s slowing economy.

EC Vice President Valdis Dombrovskis said during a press conference in Brussels that it is «worrying» that countries with high government debt have «not used the good times» to decrease their public stockpiles and build fiscal buffers to defend against an economic downturn.

«The European economy is experiencing its seventh consecutive year of economic expansion. Yet growth is slowing down», he said.

Greek woes not over

The label «excessive» is a red flag for national economies that are vulnerable to economic and financial shocks. And Athens’ imbalances were expected to be labelled as «excessive» since Greece exited its €86 billion bailout program in August with a debt pile of around 180% of GDP.

«This should not surprise anyone», Finance Commissioner Pierre Moscovici said.

The EU’s executive arm nonetheless described Greece’s financial sector as «vulnerable» due to a «very large» stock of bad loans that its lenders hold. «More progress» is also needed in Cyprus, which is struggling with an excessive amount of bad loans in its banking sector.

Public debt is a heavy burden for several EU countries, such as Spain, Portugal, and France — although they managed to escape the “excessive” label.

Part of that has to do with the fact that Madrid has enjoyed “robust” economic growth and Lisbon has decreased its bad loans stockpile and government debt.

Original Story: Politico | Silvia Sciorilli Borrelli
Photo: FreeImages.com/Takis Kolokotronis
Translation and Edition: Prime Yield

Bankia hires KPMG to sell 3 NPL and REO portfolios worth €1 billion

6 March, 2019

Bankia is on track to meet one year in advance the goal of freeing itself from the real estate heavy burden that is still in its balance sheets, by hiring KPMG to sell 3 portfolios involving nonperforming loans (NPL) and real estate owned (REO) assets worth €1 billion. The goal is to complete the sales in the mid-year.

The Spanish bank nationalized in 2012 set the goal to clean from its sheets almost €9 billion in nonperforming assets related to real estate between 2018-2020. Along 2018 alone Bankia sold bad assets worth €6 billion. And this year goes in the right direction to achieve its aim a year before the scheduled.

In a more advanced sales stage, one of the portfolios that are now in the market includes developer’s NPL with a gross book value of €500 milion. The second portfolio to be put for sale involves unsecured NPL worth €200 million. According to El Confidencial, a third portfolio is likely to enter in the market soon, constituted of REO (most of it land and dwellings) in the value of hundreds million euros, whose dimension is yet to define.

Original Story: El Confidencial | Jorge Zuloaga
Photo: Bankia
Translation and Edition: Prime Yield

Greek banks remain cautious about the securitization of NPL

6 March, 2019

Greek banks remain cautious about the two alternative proposals for the securitization of non-performing loans (NPLs) presented to them by the Hellenic Financial Stability Fund (HFSF) and the Bank of Greece. They expect to see details and want to know whether one or both of them obtain European Commission clearance, local bankers told a forum in Athens on Friday.

The Greek credit system has a large backlog of non-performing exposures, amounting to some €85 billion in end-September 2018, or about 45% of all loans.

To tackle this problem of the credit sector and the economy in general, the HFSF has proposed a plan providing for the creation of bonds out of restructured NPLs (so-called securitization) whose repayment will be guaranteed by the state in case borrowers are in distress even after the restructuring of the loans.

Simultaneously, the country’s central bank is tabling another plan for the creation of a special purpose vehicle to which a large part of the banks’ NPLs would be transferred along with the lenders’ deferred tax credits.

Speaking at an event on NPL investment held in Athens, Bank of Greece Deputy Governor John Mourmouras said the two plans complement each other, adding that «the securitization schemes are the silver bullet for the NPL problem» because «a more hands-on solution» is required.

Both plans will be voluntary, but banks remain reserved toward them at this stage. Spealing at the same event, Charoula Apalagaki, secretary general of the Hellenic Bank Association, stressed that «We have not yet received the final drafts of the plans, and you know the devil is in the detail. It is fine to have more tools, to give banks the option to use one or the other, but the plans have not matured yet and we have not yet received feedback from (the European Commission’s) Directorate-General for Competition», she said.

Theodore Athanassopoulos, Alpha Bank’s executive general manager for NPL wholesale, was also cautious about the securitization plans, stating that «different banks have different portfolios, and therefore different needs,» but added that «the Bank of Greece scheme has a great potential for sales of loans».

Original Story: Ekathimerini | News
Photo: Bank of Greece
Edition:Prime Yield

More and more Portuguese consumers seek for credit cards

6 March, 2019

The growing consumer confidence, spurred on by the economic recovery, are supporting the increasing demand for credit cards by the Portuguese, who rely more and more on their cards to purchase items for which they might not necessarily have the money.

According to new data published by the Bank of Portugal, the amount of Portuguese seeking for credit from banks has also risen considerably, with the number of people who secured loans to buy cars going up in 2018, by 120,000.

In terms of credit cards, the increase of those in debt climbed by 43,000 with 2.29 million people currently using them to make purchases.

This is now the highest number of people in debt with their credit card companies since records were first taken by the Bank of Portugal in March 2009.

The amount of debt outstanding has also climbed strongly, and now sits at €3.25 billion, another new record.

The amount owed to financial institutions for vehicle credit has ballooned to a record high, and has reached €6.1 billion euros this year. Overall, 840,000 people are in debt with banks having secured credit to purchase a car.

The Bank of Portugal has warned of a steep increase in consumer credit, explaining that this is being driven by a reduction in the unemployment rate, and an increase in wages, though interest rates on these types of credits remain high. The banking regulator however pointed to increased competition among financial institutions having resulted in them easing on the spreads levied on top of existing interest rates.

This follows after the general approval of loans in Portugal reached a 15-year high in 2018. Figures indicate that a credit of € 4.66 billion was issued, for an average of €12 million a day.

Despite concerns over the ballooning debt among consumers, the number of people unable to meet their monthly repayments actually dropped in 2018 to their lowest in almost a decade.

Nonetheless, 137,000 people are unable to pay the minimum monthly value demanded from their credit card companies, while 61,000 people have defaulted on their car repayments.

In terms of mortgages, the number of home owners who are unable to meet their repayments has fallen to below 100,000 for the first time since 2009. But despite calls on banks to employ stricter rules in issuing mortgages, Portuguese were handed close to €10 billion to purchase real estate last year, which is up almost 20% on 2017.

Original Story: The Portugal News | Brendan de Beer
Photo: FreeImages.com/ Lotus Head
Edition:Prime Yield

Piraeus Bank aims to reduce NPLs by €15 billion until 2021

4 March, 2019

Greek banks still have the highest NPL (non-performing loans) ratio across the euro zone at 44.8%, according to the most recent figures from the European Parliament. And because so, Christos Megalou, CEO of Piraeus Bank, calls on lenders to do more on reducing the country’s bad debt, despite all the significant steps already taken to bring down the level of NPLs.

In an interview to the US media CNBC, the responsible told «the four systemic banks have agreed among themselves to reduce the non-performing loans between now and 2021 by €50 billion. This is almost 28% of the GDP [gross domestic product] of this country. It is a significant percentage vis-à-vis the actual percentage being produced by this country. I would like to see this happening and I would be very happy if we are able to achieve these targets as we have set ourselves out to achieve».

In specific the case of Piraeus, one of Greece’s top banks, the aim is to reduce the NPLs by €15 billion until 2021. This after having reduced bad loans by €5 billion in 2018, the CEO said in Athens.

In the same occasion, the head of Piraeus Bank revealed that there has been strong interest from international funds in buying Greek NPLs. «We had situations where funds were competing and in the process of competition they had to pay a significant amount of money in due diligence to be able to bid for these assets. We are very happy as principal selling those loans of the level of competition and the level of activity we see in the NPL market. I would dare to say that one of the most interesting asset classes in Greece this days is the non-performing loans».

Greece put an end to nearly 10 years of financial help after it ended a third financial rescue in August and has vowed to stick to stringent fiscal targets in the coming years in exchange for some debt relief.

Original Story:CNBC | Silvia Amaro
Photo: Piraeus Bank
Edition:Prime Yield

Haya Real Estate launches the Marconi Project

4 March, 2019

Spanish servicer Haya Real Estate has just launched the Marconi Project: a set of non-performing loans (NPL) secured by real estate collateral owned by Sareb, for more than €188 million, the company informed.

This project is made up of loans that have around 1,445 registered properties under guarantee collected in 33 files. The average ticket for each of the loans offered is around €5.7 million, and 98% of the guarantees associated with these loans are already-completed homes, garages and store-rooms, while the remaining 2% is comprised of land, commercial premises and industrial buildings.

Most of these real estate collateral-backed loans are located mainly in Catalonia, Costa del Sol, Canary Islands and Madrid.

Project Marconi is divided into two phases, a non-biding phase and a biding phase, the first beginning at the end of February and ending in April with the submission of bidding offers and the closing of the transaction.

Haya Real Estate is a Spanish company leader in management of secured credit and real estate assets. Since 2016, the different sales processes launched by Haya allowed the divestment of more than €470 million.

Original Story: Haya | Kreab
Photo: Haya Real Estate
Edition:Prime Yield

Portugal’s top 6 banks sold €5.7 billion in NPL along 2018

4 March, 2019

The six largest banks operating in Portugal speeded up the sales of non-performing loans portfolios in 2018, with at least €5.719 billion having been passed on in this way, according to Lusa’s calculations.

Although Novo Banco – the successor entity to Banco Espírito Santo, which was wound up by the Bank of Portugal – is not to present its 2018 results until 1 March, at the end of the year it informed the market that it had sold to investment funds as many as 102,000 loan contracts for €2.15 billion.

Banco Montepio hasn’t presented its 2018 results yet too, but by the end of 2018 announced the sale of a portfolio including 10,000 loans worth €239 million to a company in Ireland.

As for the banks that have presented their results, Caixa Geral de Depósitos (CGD) last year sold €1.2 billion in non-performing loans and Santander Totta sold €1 billion in non-performing loans and real estate owned (REO) collateral, much of which were inherited from the former Banco Popular. BCP, by its hand, announced disposals of NPL valued €730 million last year, while BPI bank had completed bad debt sales worth €400 million until November.

Reaching 12% as to September 2018, the Portuguese banking sector NPL ratio is up to three times higher than the European Union 4% average.

Original Story: ECO |Lusa
Photo: Novo Banco
Edition:Prime Yield

OECD points out high NPL weight as one of the risks to Portuguese Economy

4 March, 2019

In a recent 140-page report about Portugal, the Organization for Economic Cooperation and Development (OECD) identifies the high weight of the non-performing loans (NPL) within the banking system as one of the main risks for the country’s Economy, despite “market improvements” over the last few years.

According to OECD, Portugal’s economy has moved back to pre-crisis levels and is expected to grow by about 2% a year between 2018 and 2020.

Comparatively low living standards, however, mean many Portuguese perceive themselves to be worse off than a decade ago.

However, the club of 36 rich nations recognizes the economic conditions in Portugal had «improved markedly» over the past few years, with unemployment falling 10% points since 2013 to below 7%, «one of the largest reductions in any OECD country over the past decade».

Strong exports had sustained growth in the years following the global financial crisis, underpinned by a tourism boom: travel and tourism exports grew at an annual rate of more than 10% between 2010 and 2017, and by 2017 accounted for almost half of all service exports, the report said.

Despite this growth, the poverty rate of the working age population remained high and subjective perceptions of wellbeing were below pre-crisis levels. This reflected «modest living standards compared with other OECD countries»and little convergence with those economies over the past few decades, the report added.

Since 2014 Portugal has been recovering from a deep recession that followed the European sovereign debt crisis and a tough economic adjustment programme overseen by the EU and the International Monetary Fund.

Further employment gains and rising real wages were likely to underpin future growth in consumption. But an expected slowdown among Portugal’s main export markets would act as a headwind to further export growth, the report added.

An increase in interest rates — potentially arising from a normalisation of monetary policy as the European Central Bank phases out its government bond-buying programme — posed a risk to business and household spending, according to the OECD.

Improvements in the fiscal balance had contributed to a fall in the public debt-to-national output ratio from 130.6% in 2014 to about 121% last year. The ratio, however, remained one of the highest among developed economies, reflecting a debt burden that «still limits the government’s ability to respond to future economic shocks».

Bank vulnerabilities also weakened the resilience of the Portuguese economy, according to the OECD. While NPL as a percentage of total lending have been reduced by more than 35% since their peak in 2016, the level of problem bank debt remained one of the highest among OECD countries.

Other risks included Brexit and rising protectionism, the report said. «Any significant increase in policy barriers in international trade» would also have a detrimental effect on Portugal as a «small, open economy», the OECD said.

Original Story: Financial Times | Peter Wise
Photo: FreeImages.com / Armindo Caetano
Edition:Prime Yield

Portuguese Banks with potential to securitize NPL

13 February, 2019

The Portuguese banks have potential to complete more non-performing loans portfolios securitization operations, following the European trend on using these financial instruments, noted the rating agency DBRS.

According to Alessio Pignataro, Senior Vice President, European ABS – Global Strucutured Finance, Portugal, Ireland and Italy are the countries were DBRS expects the banks to use these financial instruments to reduce a still high volume of non-performing loans (NPL), besides the new entries of Spain, Greece, Cyprus and, potentially, the United Kingdom.

«From a banking perspective, this measure enables faster NPL reduction and frees the management teams to focus on new businesses», Elisabeth Rudman, managing director and head of EU FIG told to Portuguese news agency Lusa, on the sidelines of a DBRS event about the theme in London.

Since 2016, the Portuguese banks completed two deals, a small number when compared to the 20 NPL securitization done by Italian banks and four other by Irish banks during the same period.

One of the Portuguese deals was led by Caixa Económica Montepio Geral when it sold the €580.6 million NPL portfolio “Evora Finance” in 2017, and the other one was closed last year by Santander Total bank, when disposed a €480.7 million NPL portfolio. DBRS rated both transactions “BBB” (low), noting though that “Évora Finance” is performing well above the initial forecast.

The rating agency also states the European Banks have made substantial progresses in reducing the huge NPL pile accumulated since the financial crisis, but several countries whose banks still have huge levels of NPL «still have a long way to go».

Legal and tax reforms were implemented in Portugal to help dealing with this problem but, in general the European banks keep struggling to collect outstanding debts and foreclose mortgages, besides the low yield profitability and pressures over the capital levels.

Original Story:Diário de Notícias | Lusa
Photo: Free Images.com /Alfonso Romero
Edition and Translation:Prime Yield

Bain Capital buys the €850 million bad credit portfolio “Atlantic” from Caixa

12 February, 2019

After its 2017 debut, throughout buying a €500 million portfolio, the nonperforming asset manager Bain Capital keeps investing in Portugal, having now closed the acquisition of project “Atlantico”, with a gross book value of 850 million, from the Portuguese bank Caixa Geral de Depósitos.

In its Report and Consolidated Accounts from 1^stSemester 2018, the Portuguese public bank announced it would be selling the non-performing loans portfolio named “Atlântico”. In the occasion, Caixa’s president, Paulo Macedo, stated that the public offer had attracted several potential buyers. According to him, this transaction would allow Caixa’s NPL ratio to be under 10%.

After completing two transactions, Bain Capital admits its plans to keep investing in Portugal. «I assume we’re going to [buy more]. (…) We like the fact this is a small market, and, because of that, some of our major competitors don’t participate that frequently», Alon Avner, Bain Capital Credit’s Europe responsible, explains.

Original Story: ECO
Photo: Caixa Geral de Depósitos
Translation and Edition: Prime Yield

Spanish Banks must improve historic lows profit margins

11 February, 2019

The improvement of their profit margins, still at historic lows, is one of the main challenges posed to the Spanish banks in 2019, according to ratings agency Standard & Poors (S&P).

Looking forward, S&P predicts more mergers among medium sized Spanish banksthis year, given the low profit margins that the sector is suffering, and that most are trading in the stock market below their book value. S&P believes that Spanish banks are well positioned, with sanitised balance sheets and favourable perspectives in terms of credit quality. However, the agency points out in its report that, after years of rating upgrades for Spanish banks, which have put them «very close to the levels of December 2011, and even before the crisis», 2019 could also see some downgrades. The agency predicts that in 2019 toxic assets on the balance sheets will continue to be reduced and that the main challenge will remain improving profit margins which remain at historic lows. In fact it is this low profitability which will drive consolidation this year which will help achieve synergies, economies of scale and cost cutting.

At the European level, S&P believe it is very unlikely that there will major cross-border mergers this year, despite the political interest in Europe that there should be. The report signals that «Banking Union is still not complete and the execution risks are greater than in domestic consolidation, where it is easier to find synergies».

Finally, S&P rules out 2019 being the year in which the State gets out of Bankia, where it controls 61.4% of the capital. Rather it predicts a «very gradual» process of withdrawal.

Original Story: The Corner
Photo: FreeImages.com /Xexo Xeperti
Edition:Prime Yield

IMF insists reduction of Greek bank’s NPL must be expedited

11 February, 2019

The International Monetary Fund (IMF) has just reiterated the need to undertake coordinated steps to expedite the reduction of nonperforming loans (NPLs) held by Greek banks.

Greece’s creditors have long cited NPLs as a major vulnerability of the Greek economy.

Speaking during a press briefing in Washington (USA9, IMF spokesman Gerry Rice sid that the organization’s executive board will in March discuss the report drafted by the IMF mission which recently visited Athens within the context of Greece’s post-bailout surveillance.

Original Story: Ekathimerini
Photo: FreeImages.com/Jonte Remos
Edition:Prime Yield

Santander sold Cerberus the €600 million “Project Tagus”

11 February, 2019

Santander Portugal closed the sale of the €600 million “Project Tagus” to an affiliate of US Cerberus Capital Management.

According to information gathered by the Portuguese news platform ECO, the transaction was closed in December 2018; having a positive impact of € 50 million for the bank’s results last year.

This portfolio comprises toxic assets belonging to former Popular Portugal bank, having sparked the interest of Apollo, Bain Capital and Arrow Global.

During the bank’s results presentation, CFO Manuel Preto explained that these real estate assets and loans became Santander Totta’s property with the integration of Popular Portugal at the end of 2017. «We tried to quickly alienate these assets, because we believe the bank’s management should be focused on granting new credit to the economy and not managing portfolios which are already adequately provisioned and which do not add much to the bank’s results», quotes the same source.

Original Story: Iberian Property | Ana Tavares
Photo: Santander
Edition:Prime Yield

Eurozone banks shed €30bn of NPL in 3rdquarter

8 February, 2019

The euro zone’s top banks shed some € 30 billion worth of unpaid loans (NPL) in the third quarter of 2018, in a new sign that European Central Bank pressure to clean up their balance sheets is bearing fruit.

The ECB wants banks to sell or provision for the bad debt they’ve inherited from the last recession so they can focus on extending fresh credit and are better prepared to withstand any new downturn.

ECB data showed NPL and advances held by the euro zone’s 107 top banks fell to € 627.7 billion, or 4.17% of the total, in the three months to September.

That was down from € 657.15 billion, or 4.40% of the total, and the end of the second quarter.

Large falls were seen in Cyprus, Italy, Greece, Portugal and Spain, and also in Germany. Even though, soured credit inherited from the last recession still accounted for a fifth of the loan book of Cypriot banks and for 40% of bank credit in Greece.

Original Story:Reuters | Francesco Canepa
Photo: FreeImages.com/Szymon Szymon
Edition:Prime Yield