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

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 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 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

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 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

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

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

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 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

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

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

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

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

VULNERABILITY INDICATORS

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

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

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

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

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

The nonperforming loans (NPLs) ratio of Spanish banks to the private sector remained at 3.56% in September, unchanged from the previous month, according to the lates data published by the Bank of Spain (BdE).

The ratio stood at 3.50% in June and July, before rising by 6 basis points in August, which it maintained in September. However, it is still below the 3.79% reached a year ago, in September 2022. In monetary terms, doubtful loans amounted to €42.081 billion, the third lowest figure of the year.

This figure has been on a downward trend so far in 2023, as it closed last year at €43.159 billion and has not reached the €43 billion mark since. This year’s low was recorded in July, at €41.754 billion.

Looking at the breakdown by type of business, financial institutions (banks, savings banks and credit cooperatives) reached a NPL ratio of 3.44% in September, after a decrease of 1 basis point in the last month. A year earlier, the ratio was 3.70%.

As for financial credit institutions, NPL reached 6.74% of the total, up from 6.47% in August and 6.29% in September 2022.

Original Story: Ecobolsa | News
Photo: Photo by Xexo_Xeperti in FreeImages
Edition and translation: Prime Yield

The opportunistic fund decided to reduce its exposure to the country following the closure of a fund. It had bought corporate loans with real estate exposure.

The Marathon fund, one of the largest opportunistic investors, wants to get rid of a large part of its assets in Spain. This investor has given a sale mandate to Alantra to transfer all the problem loans and real estate assets it has bought in recent years, valued at more than €1.2 billion, according to financial sources consulted by this newspaper.

Original Story: El Confidencial | Jorge Zuloaga 
Photo: Ibercaja – Facebook
Edition and translation: Prime Yield

The main Spanish banks increased the volume of non-performing loans (NPLs) and loans under special supervision by €4,772 million in the third quarter compared with the second, concentrated mainly in Santander and BBVA, according to the latest quarterly report by Accuracy on Spanish banks about the Spanish banking sector.

The company points out that the positive trend in NPLs in recent quarters “seems to have reversed” and began to deteriorate between July and September, leading banks to increase their provisions.

Santander has increased its special monitoring loans by 3.3% and its doubtful loans by 1.74%, due to the growing instability outside Europe. Provisions increased by 22.5% year-on-year, driven by the Americas, although the NPL ratio remained almost unchanged. The cost of risk increased by 27 bp, combined with higher provisions on a loan portfolio that was 2.3% lower year-on-year.

BBVA recorded an increase of 2.93% in the balance of loans under special surveillance due to a 2% increase in credit risk across all geographies. However, the increase in NPLS was mainly due to the worsening of retail loans in South America and Mexico. Provisions increased 30.6%, reflected in a higher cost of risk of 111.2 b.p. in the third quarter. quarter. Even so, BBVA’s NPL ratio remained below the 2022 level, falling from 3.5% to 3.3%.

At CaixaBank, according to Accuracy, the balance of NPLS declined 0.9% quarter-on-quarter thanks to the significant drop in consumer loans, but special surveillance loans increased by 4.4% due to the uncertainties in the housing market, forcing the reclassification of certain mortgages. reclassification of certain mortgages.

Provisions reported by this bank in the third quarter increased 39.0% year-on-year and 36.7% in the quarter to €933 million. Even so, Accuracy does not see a deterioration in asset quality, with an NPL ratio that remained stable at 2.7% in September compared to June. 

Bankinter’s NPL ratio increased slightly by 9 b.p., although NPLS declined by €20 million. The bank reported the largest percentage increase (191.9%) in loan-loss provisions among the main Spanish banks, in a context in which the NPL ratio remained stable: in 2022 it stood at 2.1% and at the end of September at 2.2%.

Sabadell’s NPL ratios remained stable, with loan-loss provisions down 3.7% compared to 2022 due to to lower provisions for financial assets and real estate investments.

Unicaja reduced its NPL balance by 9.6% thanks to the sale of an NPL portfolio. Thus, the bank reported a 5.6% drop in provisions in line with the 8.6% decline in loans and advances to customers and a 23% lower volume of inflows to NPLs. The NPL ratio declined to 3.4%.

Although there are also slight upturns in the cost of risk, Accuracy rules out the possibility of a banking crisis.

Analysing the data by geographies, the provisions of Spanish institutions in Europe increased across the board, with Poland being the country where they rose the most (11%).

On the other hand, Acuraccy points out that the profitability of Spanish banks has also improved across the board, and with the exception of Sabadell and Unicaja, they have started to cover their cost of capital, while the stock market value in recent months of BBVA (+64.7%), Santander (+46.8%) and Sabadell (+56.7%) have outperformed the Ibex 35 (+26.4%) and the S&P 500 (16.6%). The worst performers were Bankinter (+3.7%) and Unicaja (+9.2%).

“After the stock market volatility suffered by banks during the US regional bank crisis, European banks, and Spanish banks in particular, are still on an upward trend. In the short term bullish trend with results that continue to improve across the board in line with the rising markets, thanks to a significant increase in revenues due to the rise in interest rates and efficiency ratios higher than their European and American peers”, says the report.

Original Story: Europa Press | Author
Photo: Photo by Victor Iglesias from FreeImages
Edition and translation: Prime Yield

The sales process of project Talos II is expected to start until the end of the year.

Santander is preparing to launch the sales process of a massive non-perming loans (NPL) portfolio until the end of the year. Valued up to €5 billion, the package was named Talos II, after its predecessor Talos I, a NPL portfolio of €600 million sold to Marathon in 2021 for €100 million.

The full value of the portfolio will only be known when it is presented to the market. To this portfolio of non-performing loans will be added another portfolio, called “Sir Barton”, made up of €530 million of overdue loans whose real guarantees are up for sale.

Original Story: Jornal de Negócios | Fábio Carvalho da Silva 
Photo: Santander sede Ciudad Financiera – website Santander
Edition and translation: Prime Yield

The brutal rise in the Euribor caused by the increase in official interest rates by the European Central Bank (ECB) is beginning to take its toll on families who got into debt to buy a house. The volume of mortgages that accumulated at least three months of non-payment rose by 3.9% between April and June, to €11,823 million euros, as reported by the Bank of Spain. What is most significant, however, is that the increase with respect to March was €443 million. This is the sharpest quarterly rise since the one that occurred between January and March 2014 (€1,619 million), the quarter in which the peak of mortgage delinquency was reached as a result of the bursting of the housing bubble.  

The balance of doubtful mortgages has been falling more or less steadily since the first quarter of 2014. In all the years that have elapsed, there have only been occasional and anecdotal increases in five quarters, but in all these cases they were minor (between 55 and 213 million euros) and were followed by subsequent falls. This time, however, there are signs that this could be the beginning of a turnaround. ECB interest rates are at their highest levels since May 2001, the Euribor is at a 2008 high and high inflation is eating away at household income and ability to pay.

Non-performing mortgages, however, account for 2.44% of the total, higher than in March (2.33%), but contained in historical comparison. It is notably lower than the rate of 6.28% reached at the peak in March 2014. In any case, it is likely to increase in the coming quarters. On the one hand, because of the aforementioned increase in unpaid mortgages. And on the other, because the mortgage balance has been falling since June 2022 due to the drop in new operations and the increase in early repayments caused by the inflationary shock. The bank’s mortgage portfolio has fallen by €13,290 million and 2.7% since then, to €483,224 million euros.

Consumer and corporate

Household consumer loans are also registering an increase in non-performing loans. In the second quarter, the unpaid balance amounted to €4,148 million, an increase of €86 million and 2.11%, in line with the rise between January and March. The total consumer loan portfolio increased by 1.43% to €94,580 million, but as the increase in NPL was higher, the default rate rose to 4.38%. On the other hand, in loans to companies, both the non-performing balance (down by €522 million and 2.3% to €22,391 million) and the rate (from 4.13% to 4.09%) fell.

The data on NPLs by segment are published every three months and with a certain delay, but those on NPLs for total credit are more agile, which gives clues as to what is happening with defaults in the third quarter. In July, the total balance of doubtful bank loans fell by €399 million and 0.94%, to €41,774 million. The weight of defaults on total credit to the private sector, therefore, remained for the second month at 3.5%, the lowest level since December 2008. Bankers and supervisors, in any case, have been warning for some time that the sharp rise in interest rates will sooner or later lead to a rise in defaults, although they assure that it will be moderate and to manageable levels for the sector.

Original Story: El Periodico | Pablo Allendesalazar<
Photo: Photo by Jason Hochman from FreeImages
Edition and translation: Prime Yield