NBG to securitise €3 billion of NPL by 2022

Greece’s National Bank (NBG) plans to securitise €3 billion of non-performing mortgage loans (NPL) by 2022, its chief executive said, as the country’s lenders battle to deal with a legacy of bad debt.

Non-performing exposures (NPE) in the Greek banking sector totalled € 81.8 billion in December, which at 46.7% of their loan books is the euro zone’s highest.

The government and central bank have come up with more radical initiatives involving securitisations as the urgency for Greek banks to slash their soured loans rises.

Presenting the 2019-2022 strategy of the country’s second-largest lender, Chief Executive Paul Mylonas told a news conference that NBG also plans to sell 3 soured loans portfolios within 2019.

NBG said that it aims to reduce its non-performing loan portfolio to around 5% of total loans by 2022, from 41% at the end of 2018.

This target does not take into account the possible inclusion of its soured loans into two different schemes that Athens and the central bank have been working on, Mylonas said.

One plan to solve the problem is an asset protection scheme (APS) that was put together by the finance ministry and the country’s bank rescue fund HFSF, which holds stakes in Greek banks after taking part in three recapitalisations.

It involves special purpose vehicles (SPVs) that would issue bonds with a government guarantee for senior tranches, similar to a model known as GACS which has been tried in Italy.

A second plan proposed by the Bank of Greece is a scheme to have banks transfer NPEs to an SPV, aiming for a single-digit NPE ratio within two to three years.

Banks would transfer a portion of NPEs and deferred tax credits to an SPV that would fund the transfer with securitisations.

Under an EU-approved restructuring plan to divest non-core assets, NBG twice failed to sell a 75% stake in its wholly-owned insurance unit last year.

Mylonas recently said that NBG will start talking to potential investors for the sale of its insurance business soon. «We have an obligation to sell it by 2020,» he said. Asked if there was serious interest in the unit at the moment, Mylonas said “no”.

Original Story: Reuters | Lefteris Papadimas
Photo:Photo by Michalis Famelis / Wikimedia Commons
Edition:Prime Yield