This is one of the main conclusions of Prime Yield, in the latest edition of its annual report “Keep an Eye on the NPL & REO Markets – Portugal, Spain, Greece & Brazil”. Despite the challenging macroeconomic context, Portugal should not go beyond 1,700 million euros of transacted volume in 2023.
This is an identical volume to that recorded in 2022, a year in which NPL portfolio sales activity in Portugal fell by 44%, not continuing the post-pandemic recovery trend of 2021 and putting pressure on this market at minimum levels of recent years.
Only in 2020 was NPL sales activity lower, standing then at €1 billion. Recall that it was a context of business paralysis due to the pandemic. The peak of ‘bad debt’ transactions in Portugal was recorded in 2019, when it amounted to around €8,000 million, and that after the 2020 drop to the aforementioned €1,000 million, the year 2021 marked a recovery to 2017 and 2018 levels, with around €3,000 million transacted, in a trend that 2022 did not confirm, the report recalls.
Portugal maintains the second highest NPL ratio in Southern Europe
In the third quarter of 2022, the national financial system recorded 7,200 million euros in non-performing loans, an amount that corresponds to 3.1% of the total volume of credit granted in the country (NPL ratio). Although both indicators continued to show a downward trend over the last year, Prime Yield said that Portugal still has the second highest NPL ratio in southern Europe, only surpassed by Greece, where the weight of non-performing loans in total credit was 4.9%. The Portuguese NPL ratio continues to almost double the European average, which positioned this indicator at 1.8% in the third quarter of 2022.
Between the 3rd quarter of 2021 and the 3rd quarter of 2022, the NPL stock in Portugal reduced by 14%, with €1.2 billion of defaults leaving the financial system, from €8.4 billion (3rd quarter 2021) to €7.2 billion (3rd quarter 2022).
Taking into account the NPL sale processes underway in the 1st quarter of 2023, a potential transaction volume of close to €1.5 billion is observed, Prime Yield’s report points out. However, it should progressively increase in the coming months, as new mandates are launched on the market, and it is expected that the year will close with a level of activity identical to 2022, at around €1,700 million.
Caixa Geral de Depósitos stands out as the most active entity, leading two ongoing sale processes: the Saturno project, valued at €600 million, and another portfolio worth €500 million, including assets with and without collateral.
“The expectation for 2023 is that we will see a stabilisation of activity throughout Europe”
Original Story: Iberian Property | Felipe Ribeiro
Photo: CGD website (headquarters)
Edition: Prime Yield