NPL&REO News

Banks have €28.4 billion of loans on ice

Banks and servicers are in a race against time to reach settlement agreements over nonperforming loans (NPL) and suspended loan tranches in a bid to stem the impact of the pandemic crisis, according to Finance Ministry data. The data show that the loans on ice amounted to €28.4 billion at end-2020, while the debts on which a settlement deal had been reached with lenders and NPL management companies added up to €21.2 billion.

From March to December 2020, repayments of a total of 405,473 loans were suspended for up to nine months, a measure that ends on March.

From July 2019 to December 2020, settlement deals for 396,621 loans (mortgage, consumer and corporate) were reached with banks and servicers.In the context of the Gefyra program for the protection of borrowers’ main residences, the state subsidized the repayment tranches of 110,037 loans of 69,443 borrowers up to end-January, disbursing €47.9 million. Applications submitted up to the end-October deadline numbered 160,477, with 74,420 already approved by end-December.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Markellos P. from FreeImages
Edition: Prime Yield

National Bank applies to join Hercules bad loan scheme

National Bank (NBG), one of Greece’s four largest lenders, has applied to take part in the government’s Hercules bad loan reduction scheme and securitise a € 6.1 billion portfolio of impaired loans, it said.

Banks in Greece have been working to reduce a pile of about €70 billion in bad loans, the legacy of a financial crisis that shrank the country’s economy by a quarter. Shedding the bad debt is crucial to their ability to lend and shore up profits.

The Hercules asset protection scheme (HAPS) was put in place to help banks offload up to €30 billion of bad loans.

Under Hercules, banks can apply for a government guarantee on the senior tranche of an NPL securitisation as long as that tranche is structured to a minimum Double B minus credit rating and they sell the majority of the mezzanine and junior notes.

NBG said applying to include its ‘Frontier’ bad loans portfolio in the Hercules scheme will fetch a Greek state guarantee for senior notes of up to €3.31 billion. The guarantee would give the senior notes a zero risk-weighting.

Original Story: Reuters/Ekathimerini
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Greek banks loans subject to COVID-19 repayment relief hit $37 billion

Greek banks deferred repayments on €30 billion worth of loans last year to help borrowers cope with the financial fallout of the COVID-19 pandemic.

According to the country’s banking association, lenders granted payment deferrals to about 400,000 individuals and businesses between January and November.

The amount of loans under payment deferrals raises concerns that a chunk may become impaired when the period of grace ends, inflating the load of bad debt on banks’ balance sheets.

The European Banking Authority said in December that a deferral period cannot exceed nine months, from the time a loan is placed under deferral status.

In December, Greek’s central bank governor projected that banks were likely to be burdened by €8-10 billion of new impaired loans as a result of the pandemic.

Banks had already been working to reduce a mountain of impaired credit, the legacy of a 10-year financial crisis that shrank the country’s economy by a quarter.

Despite the reduction of non-performing loans (NPLs) by about €59 billion from a peak of 106 billion in March 2016, banks’ overall NPL ratio of 36% at the end of September remains far above the euro zone average of 2.9%.

The €30 billio of loans under payment moratoria does not include another 15 billion of mortgages and consumer and business loans already restructured, meaning banks have offered relief for €45 billion of loans in total, their association said.

Original Story: Reuters | George Georgiopoulo 
Photo: Photo by Jonte Remos from FreeImages
Edition: Prime Yield

Bank of Greece warns: new NPLs could go up to €10 bn

The burden of new nonperforming loans on Greek banks after the pandemic crisis is expected to come to 8-10 billion euros, relatively greater compared to that faced by other European credit institutions, Bank of Greece Governor Yannis Stournaras said recently.

Addressing the 8th Banking Forum, Stournaras said that Greek banks, already burdened with a high stock of NPLs, will face an even heavier burden in the future since they have exhausted the greater part – if not the entirety of – their capital reserves to deal with them. 

The central banker noted that despite the fact that Greek banks have managed to reduce their NPLs by around €50 billion since their peak in March 2016, they remain at very high levels (35.8% in September 2020), significantly above the EU average.

Stournaras stressed that Greek banks enjoy a satisfactory capital adequacy rate; however, this will be negatively affected by expected developments such as the implementation of IFRS 9 standards, the cost of securitizations of NPLs and the low quality of capital.

For these reasons, Stournaras reiterated the need for the creation of a so-called “bad bank,” to operate in parallel with the Hercules state guarantee scheme. 

His proposal, he said, would deal with the problem of deferred taxation as well and could lead to a further reduction of NPLs by €40 billion.

He asserted that the cost of this bad bank will be covered exclusively by banks.

Original Story: Ekathimerini | Business
Photo: Bank of Greece Site
Edition/Summary/Adaption: Prime Yield

Attica Bank announces the securitization of two NPL portfolios

The Greek bank Attica has announced on late december that, following a resolution of the Board of Directors meeting of 30th November 2020, proceeded to the securitization and transfer of two portfolios of non-performing loans, totalling €712 million.

The bank transferred a portfolio of non-performing corporate loans/credits of a total amount of approx. €340.8 million to a special purpose vehicle (SPV) under the name “Astir NPL Finance 2020-1 Designated Activity Company» based in Ireland. Furthermore, the SPV issued and transferred to the Bank a Class A bond of nominal value of €159,000,000 (Senior Note), a Class B bond of nominal value €1,806,000 million (Mezzanine Note) and a Class C bond (Junior Note) of nominal value of €180,000,000. The bonds derive from the securitization of the above loan portfolio.

Attica also transferred a portfolio of non-performing retail loans/credits of a total amount of approx. €371.2 million to a special purpose vehicle (SPV) under the name “Astir NPL Finance 2020-2 Designated Activity Company» based in Ireland. Furthermore, the SPV issued and transferred to the Bank a Class A bond of nominal value of €190,000,000 (Senior Note), a Class B bond of nominal value €104,921,000 million (Mezzanine Note) and a Class C bond (Junior Note) of nominal value of €76,372,000. The bonds derive from the securitization of the above loan portfolio.

Original Story/source: Aticca Bank
Photo: Attica Bank Linked In
Edition/Summary/Adaptation: Prime Yield

Alpha Bank receives 2 binding bids for the €10.6 billion “Galaxy” portfolio

Alpha Bank, Greece’s fourth largest lender, said it had received two binding bids for the sale of a bad loan portfolio worth about €10.6 billion. The transaction will involve a securitisation and also the sale of the bank’s loan servicing platform Cepal.

The portfolio, known as Galaxy, consists of retail loans worth €7.6 billion plus loans to medium-sized and large corporate clients worth €3 billion. The bank did not disclose further details.

Greek banks have been struggling to reduce a pile of bad loans worth about €60 billion, the legacy of a decade-long financial crisis that shrank the country’s economy by a quarter.

Alpha Bank, which is 11% owned by Greece’s bank rescue fund HFSF, wants to reduce its bad loan ratio to 13% of its total loan book.

It reported profit of €97.5 million euros in the second quarter of the year while its non-performing loans stood at 30.2%.

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

Q1 2021 will be decisive for the rise of a new generation of bad loans

We will do whatever it takes” for loans in moratorium status not to drop into the irrecoverable category, Intrum Hellas chief executive Giorgos Georgakopoulos has told Kathimerini.

The executive board member of one of the biggest bad-loan managers in Europe used the famous phrase of former European Central Bank chief Mario Draghi to reflect the concern debt management companies are expressing that loans worth €26 billion currently in suspension due to the pandemic do not definitively join the stock of bad loans.

These worries mostly concern the loans that were being properly serviced until April 2020, when the moratorium was put in place. As doValue Chief Executive and President of the Association of Loan and Credit Obligation Management Companies Tasos Panousis says, “the first quarter of 2021 will be a decisive period for the absorption of shocks so that we are not led to a new generation of bad loans.”

Both banks and servicers say they are determined to ease debt repayments for borrowers hurt by the crisis, while after the second lockdown the prospect for fresh moratoriums is on the table of talks with the European regulators.

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

Europe in favor of a band bank

The European Commission is expecting strong pressure on the capital position of Greek banks from the pandemic, leading to further growth in bad loans and the need for additional provisions. In its enhanced surveillance report released on Wednesday, the European Union executive body stressed the need for supplementary systemic solutions that will help to tackle the problem.

The Commission’s remark constitutes an indirect call for a solution such as an asset management company – i.e. a bad bank. The fact that this is coming at a time when the Bank of Greece has formally submitted such a proposal to the government makes it even more significant, as this is the first public statement by the Commission on the matte

The financial impact of the new crisis, Brussels notes, will suppress the already low profits of local lenders, with debt securitizations set to add to that effect even if they contribute to the streamlining of banks’ financial reports: Besides the one-off loss for banks’ capital, they lead to a permanent loss of revenues for banks as those loans leave banks’ assets and stop generating interest.

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

GREECE Greek banks set to suffer when payment holidays end

Greek banks have a large share of their loans subject to payment freezes, leaving them at risk in the future of increased provisioning and a deterioration in profitability, the EU Commission said.

The EU’s eighth surveillance report serves as a basis for the Eurogroup of finance ministers to decide on the release of the next set of policy-contingent debt measures for Greece, worth 767 million euros.

These measures, agreed with the Eurogroup in June 2018, include the transfer to Greece of funds stemming from central banks’ holdings of Greek government bonds under the Securities Markets Programme.

“While accommodative monetary policy conditions have allowed Greek banks to benefit from favourable liquidity conditions, the economic effects of the pandemic are expected to squeeze banks’ already low profitability going forward,” the EU enhanced surveillance report said.

It said the reduction of banks’ non-performing loans (NPLs) continued in the first half of 2020, supported by moratoria on loan repayments which are set to expire at the end of this year.

The ratio of NPLs fell to 36.7% in June but remained the highest in the euro zone.

Loan payment moratoria, coupled with a temporary supervisory flexibility, were instrumental in shielding banks’ balance sheets from the impact of the pandemic on the credit risk of their loan books, the report said.

“Banks have started to adjust their NPL reduction strategies but loan-loss provisions booked so far might only partially capture the eventual effect of the pandemic on asset quality,” the report said, noting that banks’ internal capacity to viably restructure loans “remains a challenge.”

Greek banks’ return on equity remained one of the lowest in the euro zone in the first half of 2020.

Original Story: Zawya by Redefinitv | George Georgiopoulos 
Photo: Bank of Greece (website)
Edition: Prime Yield

Intrum and doValue expand in Greek NPLs

Greece constitutes a magnet for Europe’s major bad-loan management companies, as it has the fourth largest stock of non-performing loans (NPL). Based on January-March 2020 data, the sum of Greek NPLs came to 61 billion euros, amounting to 30% of all Greek loans – compared to an average rate of just 3% in the European Union.

The high stock of bad loans serves to explain the activation in the Greek market of two of Europe’s three biggest NPL management companies, Sweden’s Intrum and Italy’s doValue, whose prospects are analyzed in a recent report by JP Morgan Cazenove. The latter notes that, after a period of stagnation, the supply of bad loans is expected to increase in the European market, as according to data by Intrum the provisions for loan losses by European banks increased by €120 billion in the year’s first quarter from the same time in 2019.

The Italian group, which recently completed the acquisition of bad-loan management company FPS from the Eurobank Group, is also active in Italy, Spain, Portugal and Cyprus. JP Morgan Cazenove comments that the acquisition of FPS will strengthen the doValue’s revenues by 17% in 2020 and by 12% in 2021.

Intrum is present in 25 countries across Europe, in most cases being the dominant market player. After its agreement with the Piraeus Group for the management of the lender’s bad loans, it constitutes one of the top two servicers in Greece.

According to JP Morgan Cazenove, the Swedish group, which is among the biggest investors through portfolio acquisitions, has a balanced exposure in the market of debt servicing too. The variety of its mix across various market categories, its comparatively low dependence on justice systems and the property markets of the countries it is active in, and its automized loan retrieval systems reduce the shock risks from any further lockdowns.

However, despite the positive outlook for new NPLs, Intrum is trying to reduce its pace of investments so as to reduce its leveraging, which is the sector’s highest. This, according to JP Morgan Cazenove, will likely slow down the Swedish company’s investments, and therefore the growth of its profits in the future.

Original Story: Ekathimerini |Evgenia Tzortzi
Photo: Site Intrum
Edition: Prime Yield

ECB funding help Greek banks to face profit’s challenges

Greek banks will be able to face challenges to profitability from the coronavirus crisis with the help of increased funding from the European Central Bank (ECB), said the credit rating agency Moody’s.

According to its latest credit outlook report, Moody’s expects Greek banks’ profitability to weaken as coronavirus-related market disruption shrinks quality lending opportunities and erodes fee and commission income, mainly due to fewer disbursements of new loans.

The ECB’s move in April to accept Greek government bonds as eligible loan collateral, despite their ‘B1-stable’ non-investment-grade rating, led to a steep rise in Greek banks’ ECB borrowing, Moody’s said.

Greek banks increased their ECB funding to €21.5 bn in April, around 8% of Greece’s total banking assets, from €12.4 bn in March and €8.1 bn in December 2019.

The banks borrowed through the ECB’s longer-term refinancing operations mechanism (LTRO), offered to euro zone commercial banks at -0.5%.

“We believe that Greek banks’ increased ECB funding was concurrent with their reduced interbank repo funding, which was around €13.5 bn at year-end 2019,” Moody’s said, noting that repo costs had risen due to the coronavirus pandemic.

The -0.5% cost of funding via the ECB’s LTRO, along with increased private-sector deposit balances of around €145 bn as of March at a cost not higher than 0.14%, will support banks’ net interest margins and profitability, Moody’s said.

Moody’s expects net interest income and margins at the country’s large banks – Piraeus, National, Eurobank and Alpha – to remain under pressure from falling loan balances and very low interest rates.

“However, we expect limited deterioration since banks will continue to accrue interest despite government relief measures that suspend borrowers’ repayment of loan capital for six months,” Moody’s said.

Original Story: Reuters | George Georgiopoulos 
Photo: Photo by Jonte Remos from FreeImages.com
Edition: Prime Yield

NPG and Alpha bank up provisions to cover coronavirus loan impact

National Bank (NBG) and Alpha, two of Greece’s largest lenders, increased provisions to cover anticipated loan impairments from the coronavirus crisis as they kicked off the first quarter earnings season for the sector on Thursday.

The coronavirus pandemic struck just as Greece’s banks were making headway in their bid to sell, write off or restructure billions of euros of bad debt accumulated during the last financial crisis.

The country’s economy is seen contracting by 6% this year, under the central bank’s baseline scenario, hit by restrictive measures to slow the spread of the virus, the global recession and an expected sharp drop in tourism.

The stock of non-performing loans (NPLs) declined by 16% last year but remained at a high 40% of gross loans, hampering banks’ ability to lend and finance economic recovery.

National Bank NBG, 40% owned by the country’s HFSF bank rescue fund, posted net profit from continued operations of €409 million in the first quarter, up sharply from €18 million in the fourth quarter of 2019 and boosted by gains in Greek government bonds.

Loan impairment provisions amounted to €486 million, up from €107 million in the fourth quarter, reflecting the full absorption of anticipated COVID-19 related lending losses.

Peer Alpha Bank, 11% owned by the HFSF, fell to a net loss from continuing operations of €10.9 million versus net earnings of €5.4 million in the previous quarter, due to higher loan impairment provisions and weaker trading income.

«We expect the €24 billion of stimulus measures, at 13% of GDP, to limit the recessionary impact of COVID-19 in 2020 and pave the way for a strong recovery in 2021,» the bank’s CEO Vassilis Psaltis said.

Alpha’s NPLs inched down to 30% of its loanbook from 30.1% in the fourth quarter.

National Bank’s ratio of non-performing exposures (NPEs), which includes NPLs and other credit likely to turn bad, fell to 30.9% of its loanbook from 31.3% in December.

The economic fallout from the coronavirus pandemic will likely delay planned securitisations to shift legacy bad loans off balance sheets. In response to the crisis, Greek banks have introduced moratoria on debt payments to individuals and businesses that were performing before the outbreak. 

Original Story: Reuters | George Georgiopoulos 
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

Greek banks compete for participation in the state-backed Guarantee Fund

There is strong competition among banks for participation in the Guarantee Fund for the provision of state-subsidized liquidity to Greek enterprises, with 14 lenders expressing an interest in response to the invitation published by the Hellenic Development Bank.

These banks are the four systemic ones (Alpha, National, Eurobank and Piraeus), Attica, Optima, Procredit, six cooperative lenders (Epirus, Pancretan, Thessalia, Karditsa, Central Macedonia and Hania), as well as British credit corporation Ebury.

Such is the competition for the state-backed credit that the amount of loans for which banks have submitted offers added up to €8.5 bn, while the sum of the credit with the contribution of banks has been calculated at €7 bn. Sources say the four systemic lenders have submitted demands for loans totaling over €1.5 bn each, thereby laying claim to over €6 bn between them from the liquidity to be channeled to the economy with a strict timetable up to the end of the year.

According to the announcement by the Hellenic Development Bank, the amount of €7 bn to be handed out in the form of working capital to all companies regardless of whether they have been hurt by the pandemic will be distributed among banks based on each lender’s share in the financing of small, medium-sized and large corporations.

The increased competition among lenders is also indicative of the high interest among the enterprises themselves, which anticipate the activation of the fund to bring some cash into the economy and go some way toward tackling the general recession caused by the pandemic.

The Hellenic Development Bank has already announced that is examining the applications submitted for the determination and signing of contract terms with the commercial banks. The contracts will determine the conditions of the state guarantee to maximize the benefit and minimize the cost of funding for the corporations to get loans from the banks. All companies operating in Greece are eligible for the loans providing they were not deemed problematic before January 1, 2020, are considered solvent and serviced their debts up to end-December.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Site Alpha Bank
Edition: Prime Yield

Eurobank gets the green light for Greek guarantees on securitization

Eurobank has become the first Greek lender to make use of the government’s Hercules scheme to reduce nonperforming loans after gaining finance ministry approval for state guarantees on senior tranches of its Cairo I and II debt securitisations.

Greek banks have been working to reduce €75 bn of bad loans that resulted from the last financial crisis, which shrank the country’s economy by a quarter.

The Cairo programme consists of three securitisations that together amount to €7.5 bn and will help Eurobank to reduce its ratio of so-called non-performing exposures (NPEs) to 15% in the first quarter.

Shedding the bad debt is crucial for Greek banks’ ability to lend and shore up profits. The Hercules scheme (HAPS) was put in place to help the banks to offload up to €30 bn in bad loans.

The Greek state’s guarantee on the senior notes amounts to about €2.4 bn. 

Original Story: Ekathimerini | News/ Reuters 
Photo: Eurobank website
Edition: Prime Yield

Greece and Italy follow divergent paths on NPL securitization, after pandemic

Before the coronavirus pandemic hit, banks in Italy and Greece had been pinning their hopes on securitization to help them run off billions of euros of toxic debt incurred in the last credit cycle. But the two countries could now follow divergent paths when dealing with bad loans, according to Standard & Poor’s Market Intelligence anaylists’.

Securitization — whereby loans are pooled together and sold on to investors as securities — looks set to remain a viable exit for Italian banks attempting a balance sheet cleanup once the initial shock of the outbreak subsides, analysts say. But for Greece the picture is more complicated.

Both countries came into the current crisis with some of the highest levels of bad debts in Europe, at €110 billion and €70 billion, respectively, as of the end of 2019. Not only do their banks still need to deal with this, but they could also face new inflows of bad loans as struggling borrowers default on repayments during the pandemic.

It is therefore in the interest of all parties, regulators included, that banks have a range of options on the table for unloading bad debts, including securitization, Alessio Pignataro, head of European nonperforming loans at DBRS Morningstar, told S&P Global Market Intelligence.

GACS

The Italian government has been actively encouraging banks to use securitization as a means of reducing bad debts since 2016, when it introduced Garanzia sulla Cartolarizzazione delle Sofferenze (GACS). Under this decree, banks can make use of a government-backed guarantee on the least-risky portion of securitized debt.

Some €23.7 billion of bad debt was securitized under the scheme in 2019, and €47.8 billion in 2018. Some analysts believe that Italy’s securitization wave peaked in 2018, but say that GACS, which has been extended until May 2021, remains a useful tool for banks.

“We believe that securitization will continue to play an important role for banks deleveraging,” David Bergman, managing director and head of structured finance, at Scope Ratings, said in an email, adding that a wave of new defaults could accelerate the pace of deals in 2021. Securitization activity in Italy is set to fall by about 50% to 70% in 2020 as banks pause their deleveraging plans until market conditions improve, according to an April 28 note from Scope Ratings. Italy will see around €6.6 billion of securitizations in 2020 under Scope’s baseline scenario, and €11.8 billion under an optimistic scenario. But the company expects securitization volumes to pick up again in 2021 as banks move to take advantage of GACS before it expires, and said it may depend on the speed of the recovery of the Italian economy.

Pignataro also sees a temporary slowdown in securitization deals in both Italy and Greece, where all of the systemic banks have submitted and agreed to deleveraging plans with European authorities.

Hercules

Securitization as a deleveraging strategy has a shorter history in Greece than in Italy. The Greek government introduced Project Hercules, an asset protection scheme that, like GACS, provides a state-backed guarantee on the least-risky slice of debt, in February this year. The scheme was broadly welcomed by banking analysts, although some warned that it should not be seen as a panacea for Greece’s bad debt woes.

Several banks had already launched major securitizations or were preparing them for market at the time the pandemic hit Greece, including Eurobank Ergasias Services and Holdings SA. The bank’s CEO, Fokion Karavias, reassured analysts in March that the pandemic would not derail its banner €7.5 billion securitization, Project Cairo, a multi-asset portfolio of NPLs. At that point, Eurobank had already signed a binding agreement with a buyer, Italian special servicer doValue SpA.

But it remains to be seen how the balance sheet cleanups of other lenders, such as Piraeus Bank SA, which reported in February that it planned to securitize some €7 billion of bad debt this year, will play out.

Eleni Panagiotarea, head of Greek financial think tank FinGreece and research fellow at the Hellenic Foundation for European and Foreign Policy, believes that the pandemic could pose some material challenges to Greece’s securitization plans.

“Swift implementation, central to restoring banks’ lending capacity at a critical time, is disrupted, and a number of hurdles appear down the road: how the state guarantee will operate considering post-coronavirus conditions, the competition that Greek banks will now face in the European securitization market, and of course, how the value of collateral accompanying the loans to be securitized will be affected,” she said.

She did, however, say she understands that Eurobank has submitted a plan for a third securitization that will make use of a Hercules guarantee.

The Greek government announced in April that it would provide guarantees on up to €2 billion of emergency loans to businesses facing a liquidity crunch thanks to the pandemic.

Talk of bad banks

The Bank of Greece now has doubts that lenders will be able to deleverage quickly enough using securitization, according to local media reports. It is now looking at other options — according to local newspaper Kathimerini, it is understood to be at an advanced stage of preparing plans for a national-level bad bank, which it will submit to the European authorities by the end of May.

But this plan is likely to face stiff resistance from the European Commission, Panagiotarea said.

A broader plan to introduce a pan-European bad bank is also unlikely to come to fruition as there is little appetite for risk pooling in the eurozone at present, she said.

Original Story: Standard & Poor’s Market Intelligence | Sophia Furber and Rehan Ahmad 
Photo: Photo by Vince Varga for FreeImages.com
Edition: Prime Yield

Bain Capital Credit Agrees to Acquire NPL Portfolio in Greece

Bain Capital Credit, LP announced at June 5th that it has entered into an agreement with National Bank of Greece to acquire a loan portfolio, known as Project Icon. This is Bain Capital’s second portfolio acquisition in Greece since 2018.

The portfolio comprises c. 2,800 non-performing, predominantly secured, corporate contracts with total principal amount of c. €1.6 billion. The collateral securing the loans is mostly industrial, commercial and residential real estate assets.

“We are excited to expand our presence in the Greek non-performing credit market and to have assisted one of the largest Greek banks in its deleveraging,” said Alon Avner, Managing Director and Head of Bain Capital Credit’s European business. “Project Icon demonstrates our ability to complete highly complex and innovative transactions despite the challenging environment caused by Covid-19 and further demonstrates our commitment to the Greek market”

Support in executing this deal for Bain Capital Credit was provided by Hellenic Finance and Eurobank Financial Planning Services S.A.. Arbitrage Real Estate, Delfi Partners, Property Solutions Asset Management, Prime Yield and Solum Property Solutions provided real estate valuation advice, whilst Kirkland & Ellis, Zepos & Yannopoulos and Serafeim Sotiriadis & Associates provided legal assistance. Other financial due diligence and advisory was performed by Deloitte. Sioufas & Associates Law Firm provided support to the investor. 

Original Story: Bain Capital site
Photo: Photo by Michalis Famelis / Wikimedia Commons
Edition: Prime Yield

No bankruptcy for Greek debtors without total liquidation

Worried for their own survival during the Covid-19 pandemic, people in Greece who owe money to the state or banks and can’t pay will be eligible for bankruptcy only if everything they own is taken from them.

The New Democracy government, praised for its response to handling the crisis, has ended the Katseli’s Law that provided relief for people who couldn’t pay their bills because of almost a decade of harsh austerity measures.

Those included big pay cuts, tax hikes, slashed pensions and worker firings and has already seen many lose their homes to foreclosure after the former ruling Radical Left |SYRIZA,  with then-premier Alexis Tsipras breaking his vow of “not one home in the hands of banks,” let them seize properties.

Now New Democracy’s plan is let debtors be free of what they owe banks and the state and other creditors two years after they file for bankruptcy and 12 months after the procedure ends, but only have had all their assets liquidated after a court decision, according to the new bankruptcy code blueprint Kathimerini has seen.

The government wants the new framework to be ready in the next couple of months under a plan designed to appease Greece’s creditors, the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) and banks.

It will replace the Katseli Law, the main residence protection status and the clauses about the bankruptcy of enterprises, the paper said, pushed through quietly while people were distracted with the fear of Covid-19.

The Katseli Law designed to protect people was too lengthy, the government said, as it could take up to 15 years to complete bankruptcy procedures and banks want their hands on properties and people’s asset faster,.

That doesn’t include New Democracy and its former coalition partner the now-defunct PASOK Socialists who owe some €250 million in bad loans that aren’t being paid and with a former Conservative government giving immunity to the bank officers who approved the payouts to the parties.

Original Story: The National Herald |  TNH Staff
Photo: Photo by Lotus Head /FreeImages.com
Edition: Prime Yield

Debtors will lease back their homes from the State

Greece’s new bankruptcy code will provide for the main residences of bankrupt borrowers considered financially vulnerable to be transferred to a state entity and leased back to the original owners. This will replace the existing framework for the protection of debtors’ main residence from repossession.

The government is therefore examining the creation of a corporation that will take ownership of the borrowers’ homes and lease the property back to them, with the possibility of a buyback option under certain conditions. This proposal appears to enjoy the support of banks, which are keen to find a way to stop bad mortgages from soaring due to the financial crisis resulting from the coronavirus pandemic.

This idea was discussed extensively at a teleconference with the participation of government and credit sector officials and will form part of the new bankruptcy legislation to replace the existing protection system that expires on April 30.

Borrowers will be eligible for this scheme after the liquidation of all their assets, as long as their monthly disposable household income does not exceed the standard living costs as determined by the Hellenic Statistical Authority (ELSTAT), and the officially determined value (“objective value”) of the main residence does not exceed 120,000 euros for a single borrower, rising by 40,000 euros for a married debtor and another 20,000 euros per child (up to three children).

The transfer of a debtor’s main residence to that entity will be at a price equal to the commercial value of the property. The borrower will be able to stay in the property paying a monthly rent for 12 years. Three years after the start of the lease, the debtor will obtain the right to transform the rental agreement into a 20-year contract with a buyback option.

The blueprint, which is still being discussed between the government and the banks, will provide that the rent will be set based on the average floating mortgage rate adjusted to the European Central Bank interest rate.

If the debtor pays all rental tranches for the duration of the contract, they will regain ownership of the home or be able to transfer it to their legal heirs. However, the agreement will be terminated if the borrower fails to pay three monthly rents.

Original Story: Ekathimerini | Evgenia Tzortzi 
Photo: Photo by Takis Kolokotronis / FreeImages.com
Edition: Prime Yield

Europe’s banks brace for bad debt build up from Covid-19 crisis

Europe’s banks are expected to have to set aside billions for potential loan losses as well as take profit hits because of the coronavirus crisis when they start reporting the 1st quarter results.

The region’s banks were already under pressure before the crisis with high costs, low returns, and demands to fix outdated technology. Mergers, which could potentially relieve those issues, have been difficult to pull off because of national barriers.

The largest U.S. banks, which already reported earnings by mid April, set aside $25 billion for credit losses in the first quarter, raising questions about whether European banks would follow suit.

Analysts over the past 30 days have revised upward by almost 130% their expectations for loan loss provisions in 2020 by Europe’s most important banks, according to a Reuters analysis of data from Refinitiv.

At the same time, analysts have cut by more than 40% their full-year profit forecasts for those banks, which include global banks like HSBC, BNP Paribas and Deutsche Bank, the data showed.

Regulators have said they will be lenient in enforcing accounting rules on expected loan losses, but there is pressure on European banks to be realistic about the looming downturn. Lower profitability than their Wall Street rivals will mean European banks have less room for manoeuvre.

«Those U.S. banks make huge amounts of money,» said Rob Smith, financial services partner at KPMG.

«European banks don’t have that luxury of revenue and income to absorb such significant increases» in loan loss provisions, he said. «That in turn that will dictate their approach

Though banks are not legally obliged to come up with the bulk of provisions now, «prudence is a recommendation that should be followed» given the current environment, a person with knowledge of the matter said.

The vulnerability of European banks to the outbreak was highlighted in April by the credit rating agency Fitch, which disclosed that it had taken 116 rating actions on Western European banks, mainly revising their outlook to negative.

The flood of European bank earnings will provide only a partial snapshot of how they are faring so far during the crisis, which began in earnest as the first quarter was well underway. Credit ratings agency S&P said management disclosures and comments would be «more revealing than the results themselves. »

Italian banks, which have worked hard to tackle the legacy of previous recessions, are expected to start raising provisions against loan losses in the first quarter as the economy heads for a contraction which the International Monetary Fund estimates could reach 9.1% this year, analysts say.

Italy’s banks have the highest exposure among European lenders to small- and medium-sized businesses, which are likely to suffer the most from a prolonged lockdown as the country battles with one of the world’s deadliest coronavirus outbreaks.

Morgan Stanley estimated the crisis risks saddling Italian banks with up to an additional €60 billion to €80 billion in impaired loans over the next two-to-three years, an up to 45% increase on the current stock.

Spain’s banks will also report an increase in provisions, said Nuria Alvarez, analyst at Madrid-based brokerage Renta 4.

Santander said earlier this month in a U.S. regulatory filing the pandemic may cause «us to experience higher credit losses» there.

Analysts said that a near standstill in Spain’s economy would first have a direct impact on the banks’ mortgage books, which account for around 40% of their credit portfolios, and on their consumer books, which make up for 8% of lending.

The Bank of Spain said that the country’s tourism- dependent economy could shrink as much as 12.4% this year if the coronavirus lockdown lasts 12 weeks.

At French banks, any higher loan loss provisions are expected to be «manageable», Jon Peace, an analyst at Credit Suisse, said.

Deutsche Bank is the only major European lender that analysts forecast to post a loss for the full year of 2020 as it goes through a costly restructuring. The crisis has made it difficult for the bank to predict whether it will meet its financial targets after years of losses.

Analysts doubled their expectations for Deutsche Bank’s first-quarter and full-year provisions for credit losses compared with early March, according to consensus forecasts published on the bank’s website.

Moody’s has highlighted that Deutsche Bank is among the global Europe-based investment banks that is most vulnerable to loan-loss charges.

Original Story: Reuters| Huw Jones, Valentina Za, Jesus Aguado, Maya Nikolaeva and Tom Sims
Photo: European Comission
Edition: Prime Yield

Covid-19’s recession will lead to an increase in NPL in Greece

The recession caused by the Covid-19 pandemic will lead to an increase in nonperforming loans (NPL) in Greece through the rise in unemployment, according to the Center for Planning and Economic Research (KEPE).

In its analysis titled “The Effects of Covid-19 on Greek Banks’ Nonperforming Loans,” KEPE explains that the blow from the economic slump will have a stronger effect on mortgage loans, as each percentage point that the gross domestic product falls will lead to a 3% increase in bad mortgages. The acceleration of the unemployment rate by 1% could also lead to a rise in bad loans ranging between 0.33% and 0.96% for corporate and consumer credit.

In any case the rise in unemployment is the main parameter that affects households’ ability to service their loans, so KEPE attributes great significance to the effort to contain the steep rise in bad loans, as well as the increase in state expenditure and the support of the real economy.

In Greece’s case, KEPE noted, that could mean a reduction in the primary budget surplus required for as long as is needed in order to support the economy under the extraordinary conditions comparable to post-war reconstruction. The relatively small impact of the public debt level on NPLs is an encouraging message to those responsible for drafting a more interventionary policy of support for households and corporations, according to KEPE. However, given that the support of incomes and GDP is the main factor affecting NPLs, the role of the fiscal balance should be assessed in combination with the expected favourable effect of public spending.

The financial health of banks, as reflected in the maintenance of strong capital adequacy, is for KEPE an important second line of defence to prevent new NPLs of all categories in the future, as it contributes toward safeguarding confidence in the credit system and in financial stability in general.

The KEPE analysts estimate that the negative impact on bad loans from a possible shift in property prices is expected but should be small, while increasing the incentives offered to banks for strengthening the economy’s funding will provide a small short-term support to the effort to reduce or contain the rise of bad loans.

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

Top