Money in the hands

Government to cap interest on late payment interest for non-payment of NPL

The activity of buying, selling and recovering doubtful loans will be regulated and supervised by the Banco de España. This is stated by the government in the draft law on credit administrators and buyers, which was approved by the Council of Ministers on Tuesday, with the dual aim of making it easier for financial institutions to remove doubtful loans from their balance sheets, while at the same time trying to protect borrowers from abusive or usurious collection practices.

For example, the text limits the default interest that can be charged in the event of non-payment by the consumer. The law will also oblige lenders of consumer or mortgage loans to always have a debt renegotiation policy in place prior to any legal action or demand for payment.

Regulated and supervised activity

From now on, if the new law is approved, collection companies that buy a package of non-performing loans (for example, from a bank) will have to appoint a “credit administrator” whose activity must be authorised by the Bank of Spain if the holders of these loans are individuals or SMEs. In order to be authorised by the Bank of Spain, the collection company must have “an adequate policy that guarantees the protection and fair treatment of borrowers”, according to the Ministry of Economy.

It also regulates the purchase and sale of non-performing loans (NPL), ensuring that the conditions and rights of borrowers are respected and transferring to the buyer the obligations of transparency, protection and information, including compliance with the codes of good practice to which the original creditor has subscribed.

In addition, the Bank of Spain will be responsible for supervising the activities of these services and credit purchasers, and for establishing the appropriate system of infringements and sanctions.

Intrum is the world leader in debt collection. Other well-known companies in the sector include Zahonero y Sánchez, Axactor, Lexer and Bierens. Other more popular debt collection companies, such as El cobrador del frac, are in principle outside the scope of this legal reform, as their debt collection service is not specifically focused on financial debts, but on other types of debts (mainly private or commercial debts).

Consumer protection

The bill, which the Ministry of Economy will submit to a public consultation procedure, transposes the European Directive on creditors and credit purchasers.

In addition, the Ministry of Economy has used the text to amend the Law on Consumer Credit Contracts and the Law on Real Estate Credit Contracts in order to introduce guarantees in favour of borrowers, especially in the case of vulnerable groups (beneficiaries of the minimum subsistence income or those with a low income).

Thus, the text limits the interest on arrears that can be charged in the event of non-payment by the consumer. It also defines the cases in which the interest rate on open-ended contracts (as in the case of revolving cards) may be changed, giving the consumer the right not to accept the increase or to terminate the contract. In addition, consumer credit contracts will have to clarify the conditions of compensation for early repayment of the loan, as is already the case for mortgages.

The law will also oblige lenders of consumer credit or mortgages to have a debt renegotiation policy, offering the borrower measures to reach an agreement before taking legal action or demanding payment.

Original story:  Levante | Author: Rosa María Sanchéz
Edition and translation: Prime Yield

CaixaBank’s NPL ratio at 2.8%.

CaixaBank Group posted an attributable net profit of €1.01 billion in the first quarter of 2024, up +17.5% vs. the €855 million registered in the same period of 2023, as it leverages its financial and commercial strength, which has allowed it to continue supporting families and businesses.

The NPL ratio was virtually unchanged in the quarter and below the sector average, at 2.8% (compared to 2.7% in December 2023) after applying stricter criteria for the classification of non-performing loans (NPL) within the prudential framework, thanks to rigorous and prudent management of credit risk. NPL increased slightly to €10.79 billion, with no discernible signs of deterioration in the organic evolution of credit exposures. Provisions for insolvency risk (€7.67 billion) brought the coverage ratio to 71%. Meanwhile, the cost of risk (trailing 12 months) remained low at 0.29%.

CaixaBank Group also has an optimal liquidity position, with €157.02 billion, and the Liquidity Coverage Ratio (LCR) stood at 197% as of 31 March, well above the regulatory minimum requirement of 100%.

As for the Group’s capital position, the CET1 capital ratio stood at 12.3% following the impact of the new €500 million share buyback programme that began in March (-22 bps) and which has now been fully deducted. On the other side, the solid organic capital generation in the first quarter stands out (+36 bps).

CaixaBank Group serves 20.1 million customers through a network of over 4,100 branches across Spain and Portugal and has more than €600 billion in assets.

Gonzalo Gortazar, CaixaBank’s CEO, has highlighted that “in the context of a resilient Spanish economy, at CaixaBank, we started 2024 with intense commercial activity and market share gains, while maintaining solid levels of profitability and efficiency”.

The CEO has underscored that “in these first three months of the year, CaixaBank has registered €1.13 billion in taxes, a figure that exceeds the profit obtained in the period. Out of those, €493 million correspond to the banking tax, 32% more than last year”.

Evolution of the income statement
CaixaBank’s income statement for the first quarter of 2024 with growth in all margins, reflects the strength of the bank and its positive business dynamics, with higher loan production and positive net inflows into wealth management products, in a context of interest rate normalisation.
As a result, gross income rose +12.7% year-on-year to €3.5 billion, on the back of higher net interest income (+27.4%), which reflects the impact of new production and the prevailing interest rate backdrop.
Revenues from services (wealth management, protection insurance and banking fees) amounted to €1.2 billion in the first quarter, +1.3% year-on-year following an increase in activity. The growth in revenues from wealth management (+15.8%) and protection insurance (+6.9%) offsets the decrease of banking fees (-10.8%), which were down, among other factors, due to lower account maintenance fees.
As a result, return on equity (ROE) stood at 13.4% at the end of March and the cost-to-income ratio improved once again to reach 40.3%.

Business volumes at an all-time high
Strong activity in the quarter cemented CaixaBank’s status as the leading financial institution in Spain and brought the bank’s business volume close to the one trillion-euro mark, an all-time high, after growing by more than €15 billion in the last year.
Customer funds amounted to €636.49 billion, up €6.16 billion in the quarter (+1%), underpinned by wealth management products.
On-balance sheet resources remained stable in the quarter at €463.51 billion and assets under management totalled €168.69 billion (+4.9% in the quarter), following the solid performance of the markets and significant inflows.
Net inflows into mutual funds, savings insurance and pension plans reached €3.44 billion between January and March, with money market funds being the main growth driver on the funds side. Meanwhile, protection insurance continued to perform well, with premiums growing +8.7% year-on-year.
The performing loan portfolio remained stable in the period at €344.44 billion (+0.1%). Mortgages continue to be affected by repayments, albeit at a slower pace. This factor, together with the growth in new production, allowed the registered decline (-0.7%) in the first quarter to be the smallest in the last five quarters. The consumer loan portfolio was up +2%, while the loans to business portfolio rose by +1.1%.

New loan production picked up during the period
Commercial activity remains buoyant, picking up the pace starting in late 2023 and speeding up into the first quarter of 2024, with significant growth in new loans to individuals. In particular, new mortgage lending amounted to €2.79 billion in the first quarter of 2024, up +24.1% year-on-year, while new consumer lending stood at €3.03 billion, up +15%.
New production in loans to businesses exceeded €10.5 billion through to the end of March, with 43,000 loans granted to SMEs during the quarter (+28% year-on-year).

Santander sees higher profitability in 2024 as Spanish business outperforms

Spain’s biggest international bank Santander signalled higher profitability this year as growth in lending income, particularly in its home market, helped drive first-quarter earnings higher.

The bank’s revenue rose 10% to a record high 15.38 billion euro, above the 15.06 billion analysts had expected.

The euro zone’s second-biggest bank by market value relied in the past on Latin America for revenue growth, but has recently also benefited from higher European interest rates.

“It has been a very strong start to the year… supported by good growth in net interest income in Europe and the Americas,” Executive Chair Ana Botin said in a statement.

The bank is “well on track” to meet its targets for the year, including a return on tangible equity (ROTE) of 16%, she added.

Chief Financial Officer Jose Garcia Cantera told analysts on call that would imply ending 2024 with a net profit above 12 billion euros.

Including the 335 million euro impact of the Spanish banking levy in Spain, ROTE already stood at 16.2%, compared with 14.9% reported in the quarter.

Net profit jumped to 2.85 billion euros in January to March, just short of the 2.87 billion expect by analysts.

Overall net loan provisions rose 9% while the cost of risk, which measures potential losses, rose 2 basis points to 120 bps.


At a group level, net interest income (NII) – earnings on loans minus deposit costs – rose 17.7% to 11.98 billion euros, above the 11.5 billion that analysts expected.

Against the previous quarter, NII rose 7.7% as euro zone interest rates remained higher for longer than expected, helping its Spanish business, which has been charging more on loans while keeping a lid on rates paid to savers.

Net profit in Spain rose 66%, while NII was up 24%.

In Brazil, net profit rose almost 20% despite higher provisions as net interest income increased by 25%.

The U.S. and the UK were weak spots, with net profit in the U.S. falling 6.8% due to higher investment costs and NII down 4.7% due to higher funding costs. In the UK net profit fell 22.8%.

Santander’s Tier-1 fully loaded capital ratio, the strictest measure of solvency, rose to 12.28% from 12.26% in the previous quarter.

Original Story: Reuters | Author: Jesus Aguado
Edition: Prime Yield

NPL increased by €144 million in February to 3.62%

The volume of doubtful loans in February was €42.248 billion, according to the Bank of Spain. In February last year the rate was 3.55%.

Non-performing loans (NPL) granted by all credit institutions to companies and individuals stood at 3.62% in February, barely one hundredth of a percentage point higher than the 3.61% recorded in January, although higher than the 3.55% recorded a year earlier, according to data published by the Bank of Spain.

The volume of doubtful loans in February was €42.248 billion, a figure that has risen by 144 million (+0.34%) compared to January. Compared with a year earlier, the volume of doubtful loans fell by 0.81%, €347 million less.

At the same time as this increase in doubtful loans, there was no change in the total amount of credit granted. In February, banks registered €1.135 billion in loans, barely one million euros less than in January. Moreover, it is €33,494 billion less than in February 2023.

The data broken down by type of institution show that the doubtful assets ratio of all deposit institutions (banks, savings banks and cooperatives) closed January at 3.52%, up from 3.50% the previous month, and also up from 3.46% a year earlier.

The NPL ratio of financial credit institutions stood at 6.59% in the second month of the year, up from 6.53% in January, and also up from 6.04% a year earlier.

According to data from the Bank of Spain, the provisions of all credit institutions rose to €30.026 billion euros in February, an increase of 96 million euros compared with the previous month.

Original Story: Idealista News
Edition and translation: Prime Yield


€113 bn in loans to developers: Bank of Spain urges vigilance against brick risk

The Bank of Spain is not letting its guard down. Amid the debate for banks to resume lending to developers, the supervisor calls for “increased monitoring” of the banking sector’s exposure to bricks and mortar. And it puts the loans to companies linked to property development and construction at €113 billion at the end of 2023.

It represents a weight of 8.3% of total bank financing to the private sector (households and companies) in Spain. However, the Bank of Spain remains cautious for two reasons. The first is that most of it is in the form of variable-rate operations (almost 70% of the total), so that at the end of last year these companies would already have largely absorbed the rise in interest rates associated with the ECB’s monetary tightening cycle.

And second, because refinancing risks “appear contained, at least in the short term”. Just over 90% of the bank debt of companies in this real estate sector has a residual maturity of more than one year.

Identifying the accumulation of risks

“It is advisable to strengthen the monitoring of real estate exposures in the banking sector in order to improve the ability to detect the possible accumulation of risks and better measure the impact of their potential materialisation,” the Bank of Spain stresses in its latest Financial Stability Report.

The government wants to speed up the approval process for property developers as a key measure to reduce house prices. Although the banks are cautious and guarantee that they will maintain the criteria for approving loans according to their risk models as a containment dike, according to financial sources. The ghost of the 2008 crisis is still very much on banks’ minds.

In fact, the balance of loans for development and construction has already accumulated a fall of more than 80% from 2008 levels, according to updated data from the Bank of Spain. Since the start of the Cobid crisis, the fall has been 17%, deepening the correction from the 76% plunge recorded between 2008 and 2019.

Uncertainty after the wars

The Bank of Spain identifies the geopolitical situation as the main threat to financial stability, just as Iran attacked Israel this weekend and the shadow of a wider war is spreading across the world. In particular, it points to the risk of continued pressure on commodity, gas and oil prices, which could postpone the reduction in inflation.

“The potential remains for geopolitical tensions to negatively disrupt trade in energy and other commodities – and in commodities more generally – and to trigger sharp falls in the prices of risky financial assets. To the extent that these tensions translate into higher levels of economic uncertainty, their impact on economic activity could be significant,” the regulator warns.

Original Story: Vox Populi | Author: Rubén Sampedro
Edition and translation: Prime Yield


Spanish mortgage delinquencies rise to 2.6% by end-2023

Mortgage delinquency in Spain has risen to 2.6% at the end of 2023, with an increase of 0.3% compared to the end of 2022, according to data from the Spanish Mortgage Association (AHE) collected by the Bank of Spain.

The Spanish Mortgage Association (AHE) has revealed that delinquencies on loans granted for house purchases reached 2.6% at the end of 2023, compared with 2.3% at the end of 2022, according to data from the Bank of Spain. This increase has added around 900 million euros in doubtful mortgage assets over the year.

Despite this increase, the AHE points out that this rate of doubtful assets is at levels comparable to those observed at the beginning of the financial crisis in 2008, and far from the peak of 6% reached in 2014. The association explains that mortgage lending has historically had one of the lowest default rates due to the “sentimental implications” associated with home ownership.

In contrast, the NPL ratio for real estate activities has shown a slight improvement, standing at 3.0% at the end of 2023. The EHA points out that non-performing loans in this sector currently account for around 10% of non-performing loans in the corporate sector, a significant decrease from the crisis levels of 2011 and 2012.

By 2024, the EHA forecasts that mortgage delinquencies could experience upward adjustments, but the possible reduction in interest rates by the European Central Bank (ECB) could provide relief to households and companies in Spain. The association stresses that this reduction would benefit a large proportion of borrowers, especially those with mortgages that are subject to six-monthly reviews.

In summary, although the improvement in credit quality depends not only on the evolution of interest rates but also on the general health of the economy, mortgage delinquencies are expected to improve next year thanks to possible monetary measures by the ECB.

Original Story: Estrategias de Inversion
Edition and Translation: Prime Yield

Banco de España

Bank of Spain will be supervising servicers

The Bank of Spain will supervise servicers, platforms that manage the recovery and sale of portfolios of non-performing loans (NPL) and real estate assets sold by banks, such as Intrum, Servihabitat, DoValue, Hipoges, Diglo and Lexer. Their competence will come with the regulations being finalised by the government to transpose into national law the 2021/2167 directive approved in 2021 in Europe and which countries had to incorporate before 29 December last, according to sources familiar with the document, as confirmed to

The industry has been in favour of the Bank of Spain from the outset because of the nature of the assets managed by the servicers (portfolio of debt and banking assets), although their allocation was not entirely clear.

The reluctance was due to the fact that they are not financial institutions, but the agency already supervises other non-financial companies with functions related to the sector, such as valuers or money transfer companies. The directive regulates a sector that, in Spain as in many other countries, lacks specific and comprehensive regulation.

It aims to establish a common legal framework for credit managers and purchasers of portfolios originated by European banks. Most countries have implemented the Directive, but the early elections in Spain interrupted the process.

The regulation will require credit managers to be authorised in one EU member state and then be able to operate in any other with a European passport, and it will be the supervisors of those countries who will monitor their activities on the portfolios they manage in each market. An official register will be set up for authorised persons.

They will have to comply with certain requirements, such as having a registered office in a Member State, having sound governance systems and adequate internal control mechanisms, or dealing diligently and efficiently with the claims of the holders of the loans they manage.

Doubtful loan portfolios

The competent authorities will have supervisory, investigative and sanctioning powers and may even revoke the authorisation in certain circumstances. Purchasers of portfolios will not be subject to authorisation requirements, but will be subject to certain reporting and other requirements, such as the appointment of a credit manager if they do not perform this function themselves.

For their part, banks will have specific reporting obligations to potential purchasers to enable them to value the portfolios and will have to report to the supervisor on the transactions they undertake. For the customer or creditor, protection will be improved by obliging the purchaser of his debt to notify him of the transfer.

When transposing the Directive, the Member States may apply more ambitious rules than those laid down in the Directive, such as extending its application to portfolios held by operators other than banks, but the tendency in the Member States has been to limit it to portfolios of doubtful debts whose sale or transfer has taken place since 1 January. This application would exclude portfolios of, for example, mortgages or short-term receivables.

Original Story: El Economista | Author: Eva Contreras
Translation and Edition: Prime Yield

NPL pile

Europe’s debt collectors face reckoning as bad loans vanish

Europe’s debt collectors have gone from feast to famine amid a collapse in the number of bank loans turning sour.

Companies that recover unpaid bank debts, and which thrived in the aftermath of the euro zone sovereign debt crisis, are rethinking their business models and examining tie-ups with rivals after COVID-19, an energy crisis and two-decade-high interest rates failed to unleash a new wave of loan defaults.

Banks in Europe’s south have largely completed the clean-ups that once fed the bad loan bonanza and pulled in overseas investment firms such as Apollo, opens new tab, Cerberus, PIMCO, Elliott and Lone Star, while government support measures have helped keep companies and households on their feet.

Non-performing loans (NPLs) have held at 1.8% of total bank loans in Europe for six straight quarters, official data show.

In Italy, the continent’s biggest market for bad debts, sales last year totalled 31 billion euros, a third of the 2018 peak. Back then, virtually all disposals came from banks, while more than half of the total in 2023 were re-sales.

Shares in some of the continent’s main players including Sweden’s Intrum, opens new tab – Europe’s biggest debt collector – and Italian leader doValue, opens new tab hit record lows this month as investors weigh whether efforts to restructure their business can work. Both companies declined to comment.

“Several players are undergoing a metamorphosis,” said Francesco Cataldo, a director at consultancy PwC Strategy& in Milan.

Keeping loan managers in activity is important because they can provide a new lease of life to assets – sometimes businesses or properties – that are tied up in insolvency or restructuring procedures, helping economic growth.

Higher debt costs, lower bad loan flows

Many collectors have not only stopped buying new impaired loans now that debt costs make that economically unviable, but are also shedding assets bought in the past.

Intrum, whose shares are down 78% this year, in January sold a nominal 33 billion euro loan portfolio to Cerberus, retaining management of the loans and using the cash to cut its recently downgraded debt. It is working with advisers to improve its debt position.

Similarly, Italy’s Mediobanca (MDBI.MI), opens new tab in October quit the NPL investment business and sold its arm that held a nominal 6.5 billion euros in bad loans.

Intrum’s ‘capital light’ model was embraced last week by Italian state-owned bad loan manager AMCO when it presented a new three-year strategy, saying it would reduce loans under management and cut its financial debt to zero.

“Banks have minimal impaired loan levels and high capital buffers,” AMCO said, pointing to structurally lower new bad loan flows and mounting competition in the sector, where firms must comply with new European Union regulation by mid-2024.

Banks’ healthy loan books also threaten collectors that never invested directly in NPLs, relying instead on contracts with lenders outsourcing debt recovery. As they gradually expire, those multi-year contracts may not be renewed.

Italy’s doValue, which is backed by Japan’s SoftBank Group, opens new tab and has a key UniCredit, opens new tab contract ending in 2025, is expected to outline alternative revenue sources.

Its shares have lost 47% this year after it reported a 2023 loss on an impairment it booked on its operations in Spain, where it lost a major contract in 2022.

M&A Revival

In a crowded market, mergers offer an obvious way for debt collectors to reduce competition and increase scale.

But investment bankers say the poor performance of listed bad loan specialists renders valuations unattractive for sellers.

Multiple deals have been explored but failed to go through in recent years, with varied business models making it hard to set price tags that would spur big investment funds to sell the debt servicers they bought in the boom times, the bankers said.

Hopes of an M&A revival are now pinned on fintech group ION’s 1.3 billion euro acquisition of Italian loan manager Prelios from U.S. hedge fund Davidson Kempner.

Valued at around nine times its core profit, Prelios could set a benchmark for future deals, two industry sources said.

ION gained government clearance this month to buy Prelios and now needs central bank approval. It is then expected to merge Prelios with Cerved, another NPL business it bought in 2021.

Original Story: Reuters | Author: Valentina Za
Edition: Prime Yield

Digo Poster

Diglo achieves 3 million profit in 2023

Diglo, Santander’s servicer, made a profit of €3m in 2023, more than double that of 2022, when it posted a profit of €1m, according to the bank’s annual report.

In addition, it has launched a technology investment plan for the period 2024-2025 with an amount of more than €4 million.

The aim of the plan, according to sources from the ‘servicer’ explained to Europa Press, is to boost the efficiency of daily internal procedures through automation and the application of artificial intelligence, which will, in turn, result in an improvement in the quality of customer service.

With regard to its activity during 2023, the firm has managed more than 400,000 contracts for debt recovery in the non-performing loan portfolios (NPLs) business and has recorded a 10% increase in the recovery rate on managed stock of NPL compared to 2022.

In addition, the portfolio turnover has been above 30% of published properties, while in the business of managing real estate assets acquired in foreclosure processes (REOs), the servicer has managed nearly 4,000 properties.

Diglo began operating in early 2022 as Santander Group’s real estate servicer under the Deva umbrella, with a total portfolio of more than €5 billion in assets.

Its function is to manage assets acquired in foreclosures (REOs) and non-performing loans (NPLs) of both Santander Group and third parties. In the REOs area, these 4,000 assets of various types (primary residences, holiday homes, logistics assets, residential and offices) spread throughout Spain are grouped together, while in the NPLs business, at the start of its operations, it had around 200,000 contracts under management, 70% of which were SMEs.

This ‘servicer’ is headquartered in Madrid and has ten branches in seven regions: Western and Eastern Andalusia, Catalonia, Central, Levante, Northwest and North, although the network covers the whole of Spain.

Original Story: Bolsamania | Author: Europa Press
Translation and edition: Prime Yield

Santander Consumer Lisbon

Santander Consumer earned €1.321 billion in 2023

Santander Consumer Finance, the Santander Group’s subsidiary specialising in consumer finance, posted a net profit of €1.321 billion in 2023, 17.4% less than in 2022, according to the accounts sent by the company to the National Securities Market Commission (CNMV).

The business in Spain and Portugal posted earnings of €806.3 million, almost quadrupling its 2022 result of €206.6 million. Ordinary revenues in this unit increased 65.0% to €1.6 billion.

At the consolidated level, net interest income fell 4.0% to €3.425 billion, affected by the change in the conditions of the TLTRO programme and the rise in interest rates.

In the first half of the year, Santander told Europa Press that the bank was “actively” repricing loans, focusing on the most profitable segments and increasing customer deposits”.

In fact, interest income soared 53.3%, although interest expenses quadrupled to €3.006 billion euros.

Customer loans grew 8.45% to €115.507 billion, while deposits rose 18.1% to  €48.844 billion.

Santander Consumer Finance paid a dividend of €0.32 per share to its parent company, Banco Santander, for a total of €607.4 million and almost 46% of the profit obtained by the finance company in 2023.

Original Story: Capital Madrid | Author: C.M.
Translation and Editions: Prime Yield

Lending to households slows down at the start of the year, falling by 16.3 bn

Lending starts 2024 with the brakes on. Lending by financial institutions to households fell by 2.4% year on year to €679.183 billion, while the decline in lending to non-financial corporations was somewhat milder at €922.960 billion, 1.4% less than in January 2023. From one period to the next, interest rates in the eurozone have risen by 200 basis points, from 2.5% at the beginning of last year to the 4.5% set by the European Central Bank (ECB) in September, leading to an increase in the cost of financing.

Faced with higher borrowing costs and rising inflation, the granting of loans was reduced by more than €16.361 billion in the case of families and by €12.736 billion in the case of companies. This decline was also observed on a monthly basis, albeit at a more moderate pace. Household borrowing fell by €2.757 billion, 0.4% less than in December, while business borrowing rose by €24 million.

These data were recorded in the midst of the moderation experienced by the twelve-month Euribor, the index to which most mortgages in Spain are referenced, which closed January at 3.609%, its third consecutive monthly fall. In the same month of 2023 it stood at 3.337%. Although far from the highs of 4.1% recorded last summer, the rise in interest rates has caused a slowdown in lending activity in recent months, especially compared to the second half of last year.

The rise in house prices and the use of savings to repay mortgages, which have risen sharply since they were granted free of charge, have caused the outstanding balance of household mortgage loans to continue to fall, to €494.793 billion, down 3%. This is the lowest figure since 2006, when it fell below the €500 billion mark, according to data published by the Bank of Spain. Nevertheless, the amount that families allocate to their homes continues to account for the majority of their debt, at around 73%.

The moderation in the volume of loans earmarked for housing contrasts with consumer financing, which rose by 3.5% to €98.821 billion. At the same time, the balance of bank loans to enterprises fell by 4.4% to €453.641 billion. On the other hand, debt securities remained above 134 billion, while foreign loans rose by 2.2% year-on-year to 335.242 billion.

Original Story: La Información
Edition and translation: Prime Yield

Banks reduce NPL stock by €1.3 billion in 2023

Spanish banks reduced their portfolio of nonperforming loans (NPL) (NPL) by 1.291 billion euros in 2023, although the NPL remained unchanged at 3.54% due to the fall in the total stock of credit, which was 38.208 billion euros, according to data from the Bank of Spain consulted by Europa Press.

Specifically, the NPL ratio was 3.54% in December, three basis points lower than the 3.57% recorded in November. With respect to December 2022 there has been no change. The annual maximum in 2023 was recorded in October (3.60%), while the minimums were in June and July (3.50% in both cases).

Thus, the total stock of doubtful loans was 41.868 billion euros in December, 1.291 billion less than the 43.159 billion in December 2022. Compared with November, the fall was 549 million euros.

On the other hand, during 2023, the total balance of credit granted contracted by 38.208 billion euros at a year-on-year rate, standing at 1.181 trillion euros. Compared with November, the total credit balance decreased by 5.22 billion euros.

The data broken down by type of institution show that the NPL ratio of deposit institutions as a whole (banks, savings banks and cooperatives) closed 2023 at 3.44%, one basis point lower than in November and also than in December 2022. During the year, these institutions reduced their doubtful assets portfolio by 1.508 billion euros, to 38.768 billion euros.

The NPL ratio of financial credit institutions contracted to 6.33% in the last month of the year, up from 6.97% in October and above the 5.93% of a year earlier. In 2023, this type of institution recorded a rise in doubtful assets of 216 million euros, to a total of 2.908 billion.

According to data from the Bank of Spain, provisions for all credit institutions fell to 29.870 billion euros in December, a decrease of 379 million compared with November (1.25%). Compared with a year earlier, they fell by 1.198 million euros (-3.85%).

Original Story: Bolsamania | Author: Europa Press
Translation and edition: Prime Yield

BBVA sells a €500 million NPL portfolio

BBVA has announced the sale of a portfolio of unsecured non-performing loans (NPL). This portfolio has an approximate gross value of €500 million. The sale will have a positive impact on the bank’s NPL ratio in Spain.

BBVA reached an agreement to transfer a portfolio of unsecured unpaid loans (known as the ‘Nairobi Project’), with an approximate gross value of €500 million. This operation is part of BBVA’s strategy for value creation and balance sheet management with capital optimization. It will have a positive impact on the bank’s NPL ratio in Spain.

The sale of the portfolio has been divided into two segments. The first segment was sold to the KRUK group. The second has been transferred to a subsidiary of Cerberus Capital Management, L.P. (‘Cerberus’). GCBE, formerly Gescobro, will manage the portfolio for Cerberus.

Edition: Prime Yield
Original Story: BBVA Press

Large banks exceeded €70 billion in bad loans in 2023

The large Ibex 35 banks will have €70.978 billion in non-performing loans (NPL) at the end of 2023, 2.3% more than in 2022 and an average NPL ratio of 2.99%, according to the accounts published in recent weeks and consulted by Europa Press.

Thus, the average NPL ratio of the institutions (Santander, BBVA, CaixaBank, Sabadell, Bankinter and Unicaja) is 2.99%, slightly below the NPL ratio compiled by the Bank of Spain, which stood at 3.45% in November. However, it should be noted that the data collected includes the international business of these banks and that the situation varies from one bank to another.

If we also take into account special monitoring loans, the main Spanish banks ended 2023 with a portfolio of problem assets of 241,872,000 loans and advances to customers. €241.872 billion euros, 7.4% more than in 2022.

Original Story: Europa Press
Edition and translation: Prime Yield

Spain’s 2023 mortgage stock at 18-year low

Specifically, the Spanish mortgage stock stood at 494,986 million euros in December, a decrease of 3.1% compared to December 2022 and a decrease of 0.3% compared to the previous month.

Since July, the stock of mortgages has been below half a trillion euros, which in itself is the lowest level since May 2006. If only the year-end figures are taken into account, the Spanish mortgage stock has fallen to the level of 2005.

New operations amounted to 5,128 million euros in December, which means that they closed 2023 with a total of 56,242 million euros. This is a high figure from a historical point of view, as in the last ten years it has only been exceeded in two years: 2021, with 59,425 million euros, and 2022, with 65,220 million euros.

Of the total new operations signed in 2023, 4,728 million euros correspond to mortgage renegotiations. Spanish households have not renegotiated such a large volume of mortgages since 2016, when mortgage loans worth 6,396 million euros were renegotiated.

The new credit granted in 2023 means that the total volume of mortgage repayments, both planned and early, was 72,239 million euros.

In terms of interest rates, new mortgages signed in December were at an average interest rate (NDER) of 3.74%, a fall of five basis points and the best figure since May this year. However, this is significantly higher than in December 2022, when mortgages were signed at an average rate of 2.91%.

Despite this, portfolio repricing has caused the weighted average interest rate on Spanish mortgages outstanding to rise by three basis points to 4.64%, the highest level since July 2009.

Original Story: Press Digital | Author: Agencias

Translation and edition: Prime Yield

Photo: Big Stock

Alantra Offices

Alantra partners with Spanish family office Ion Ion

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

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

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

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

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

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

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

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

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

NPL pile

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

The non-performing loan (NPL) ratio of Spanish banks fell to 3.57% in November from 3.60% in October, according to the latest provisional data from the Bank of Spain.

Despite the slight increase, the ratio is still close to the 2008’s lows recorded in the summer, when it stood at 3.50%. Compared with the tenth month of 2022, the bank’s non-performing loan ratio remained 11 basis points lower, when it stood at 3.68%.

The decline in the ratio was due to the increase in total loans, which offset the slight rise in NPLs. Thus, the total stock of loans held by deposit-taking and financial institutions increased by 17 million euro to 42.396 billion euro. Compared with the same month of the previous year, doubtful loans decreased by 2.974 billion euro.

On the other hand, the total amount of loans granted amounted to 1.186 trillion euro, which means that it increased by 9.396 billion euro compared with October and reached its highest level since July. Compared with a year ago, loans contracted by 45.158 billion euro.

The data broken down by type of institution show that the NPL ratio of deposit-taking institutions as a whole (banks, savings banks and cooperative societies) ended November at 3.45%, three basis points lower than in the previous month, but down from 3.59% a year earlier.

The NPL ratio of financial credit institutions rose to 6.97% in the eleventh month of the year, up from 6.93% in October and above the 6.37% of a year earlier.

According to the Bank of Spain, provisions for all credit institutions fell to €30.249 billion in November, down 0.18% on the month and 6.13% on the year.

Edition and translation: Prime Yield
Original Story: Bolsamania | Europa Press
Photo: Unknown


Spain’s High Court annuls €91 million in fines for four big Spanish banks

Spain’s High Court has annulled 91 million euros of fines imposed on four Spanish banks, including Santander and BBVA, for selling interest rate derivatives to customers above market rates.

The competition watchdog imposed the fines after it considered the lenders, which also included Caixabank and Sabadell, had fixed above market rates the price of derivatives that were used to hedge the interest rate risk associated with syndicated loans for project finance.

“The court considers that it has not been accredited that during the entire period under investigation from 2006 to 2016 there was a common plan between the sanctioned entities that justifies the legal classification of a single and continuous infringement”, the court said in a statement.

The court upheld the appeals filed by Santander, BBVA Sabadell and Caixabank against the watchdog’s rulings of Feb. 13, 2018.

Original Story: Reuters | Jesus Aguado
Translation: Prime Yield
Photo: Unknown

KRUK buys a €60 million NPL portfolio from Bankinter’s consumer finance business

Bankinter is making progress in cleaning up its balance sheet by selling off impaired assets. Its finance company, Bankinter Consumer Finance, has sold a portfolio of consumer loans and cards, mostly non-performing (NPL), to Invest Capital Malta, part of the Polish debt collection group KRUK. The portfolio, known as the Jábega portfolio, has a gross value of €59 million, according to market sources.

The transaction follows at least two sales by the same bank this year. Bankinter placed the Maui and Kona projects, with a combined gross exposure of almost €340 million. The transactions, advised by GBS Finance, were placed with the UK fund LCM Partners (Link Financial) and comprise €280 million gross in unsecured loans (Maui) and more than €60 million in loans on industrial premises and warehouses (Kona). 

In the first case, a portfolio of NPL to individuals and SMEs with a nominal value of €315 million was allocated (a further €330 million was allocated to Link Capital Management), while BBVA allocated a portfolio of €427 million in financing, also unsecured, to KRUK, and Cerberus allocated a sub-portfolio of €250 million in loans to SMEs, which will be managed by GCBE (formerly Gescobro). The Polish company plans to invest around EUR 175 million this year in the purchase of debt portfolios in Spain, a market that has thus become one of its main investment destinations.

Throughout the year, the banking sector has focused on shedding ballast, believing that defaults would rise due to the higher cost of living with inflation and the vertical rise in interest rates. The consultancy firm Atlas Value Management estimates that transactions with a gross volume of €25,000 million will be concluded this year, of which 67.30% will be unsecured loans, similar to the transaction just concluded by Bankinter.

The portfolios of most banks (Santander, BBVA, CaixaBank, Bankinter, Sabadell, Abanca, Unicaja and Cajamar), their financial subsidiaries and those of El Corte Inglés and Carrefour, as well as other players such as Sareb, Cofidis, Blackstone, Axactor and the investment banking division of Deutsche Bank, have been placed on the market. 

KRUK has been one of the most active players this year in the acquisition of unsecured NPL. Before the summer, the Polish collection company took over two of the largest transactions launched by banks in this type of debt: a sub-tranche of CaixaBank’s Twister project and another of BBVA’s Nairobi project.

Original Story: Eva Contreras | El Economista
Image: Website Bankinter
Translation & Edition: Prime Yield

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

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

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

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


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

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

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

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

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