Write-offs are the main tool for the cleaning up of Portuguese banks’ balance sheets

12 April, 2019

The Portuguese banking system’s non-performing loan (NPL) ratio continued to decline, to 11.7% as of Q2 2018 (and 11.3% as of Q3 2018), after peaking at 17.9% as of Q2 2016. This 6.2 percentage points contraction in the NPL ratio is mainly due to a nearly 40% reduction in non-performing loans outstanding amount, compared to a 2.1% decline in total loans outstanding amount.

According to the Bank of Portugal’s data, 42% of the decline in the NPL ratio is due to write-offs. Sales and securitisations accounted for 23% of the ratio’s decline. Nearly two thirds of the cleaning up of Portuguese bank balance sheets occurred via the removal of non-performing loans from the banking system.

Moreover, the reclassification of NPL as “performing loans” more than offset the flow of loans that turn non-performing. The net flow of non-performing loans contributed to a 24% reduction in the NPL ratio.

Breakdown of the decline in the NPL ratio in Portugal between Q2 2016 and Q2 2018

Original Story: FXStreet
Photo: Banco de Portugal
Edition: Prime Yield

NPL secondary market gain momentum in Portugal, says EU

8 March, 2019

Although its nonperforming loan (NPL) ratio remains high, over the last few months there has been a considerable reduction in Portugal’s bad debt stockpile «as the secondary market gains momentum», says the European Union (EU) on its «Country Report Portugal 2019».

«Portugal continues to correct its macroeconomic imbalances. Although all main indicators are moving in the right direction, public and private sector debt and foreign debt are still significantly above the benchmarks set», says the report, adding that «This continues to have a negative impact on the country’s external position, where the pace of adjustment is expected to slow down».

According to this document, Portugal has made some progress in increasing the quality of its financial system, namely by increasing the efficiency of insolvency and recovery proceedings, reducing impediments to the secondary market for the resale of nonperforming loans, and improving access to finance for businesses.

«While the ratio of non-performing loans remains high, there has been a considerable reduction as the secondary market gains momentum», says the same document, adding that «Portuguese banks have steadily decreased their stocks of non-performing loans and non-performing loan ratios in line with guidance from the Single Supervisory Mechanism» and that «lenders either work out bad debts internally, jointly through a servicing platform or increasingly put them up for sale on the secondary market».

So, adds the EU, «as the Portuguese property market is experiencing a strong period of growth, the secondary market for non-performing loans (often backed by real estate) is becoming increasingly competitive, with many foreign players actively looking to purchase nonperforming assets».

In 2017, the total value of NPL secondary market transactions reached about €2.3 billion, but given the strong pipeline of new deals, «this figure is set to be surpassed in 2018», forecasts the EU.

Highlighting that «the decline in nonperforming loans (or ‘bad’ loans) along with the improved profitability is reducing the balance of risks in the banking sector», the documents also notes that the «aggregate NPL fell by roughly one third over the last two years», thanks mainly to the NPL disposal programmes.

Story: Prime Yield
Photo:FreeImages.com/Armindo Caetano

Haya Real Estate launches the Marconi Project

4 March, 2019

Spanish servicer Haya Real Estate has just launched the Marconi Project: a set of non-performing loans (NPL) secured by real estate collateral owned by Sareb, for more than €188 million, the company informed.

This project is made up of loans that have around 1,445 registered properties under guarantee collected in 33 files. The average ticket for each of the loans offered is around €5.7 million, and 98% of the guarantees associated with these loans are already-completed homes, garages and store-rooms, while the remaining 2% is comprised of land, commercial premises and industrial buildings.

Most of these real estate collateral-backed loans are located mainly in Catalonia, Costa del Sol, Canary Islands and Madrid.

Project Marconi is divided into two phases, a non-biding phase and a biding phase, the first beginning at the end of February and ending in April with the submission of bidding offers and the closing of the transaction.

Haya Real Estate is a Spanish company leader in management of secured credit and real estate assets. Since 2016, the different sales processes launched by Haya allowed the divestment of more than €470 million.

Original Story: Haya | Kreab
Photo: Haya Real Estate
Edition:Prime Yield

Portugal’s top 6 banks sold €5.7 billion in NPL along 2018

4 March, 2019

The six largest banks operating in Portugal speeded up the sales of non-performing loans portfolios in 2018, with at least €5.719 billion having been passed on in this way, according to Lusa’s calculations.

Although Novo Banco – the successor entity to Banco Espírito Santo, which was wound up by the Bank of Portugal – is not to present its 2018 results until 1 March, at the end of the year it informed the market that it had sold to investment funds as many as 102,000 loan contracts for €2.15 billion.

Banco Montepio hasn’t presented its 2018 results yet too, but by the end of 2018 announced the sale of a portfolio including 10,000 loans worth €239 million to a company in Ireland.

As for the banks that have presented their results, Caixa Geral de Depósitos (CGD) last year sold €1.2 billion in non-performing loans and Santander Totta sold €1 billion in non-performing loans and real estate owned (REO) collateral, much of which were inherited from the former Banco Popular. BCP, by its hand, announced disposals of NPL valued €730 million last year, while BPI bank had completed bad debt sales worth €400 million until November.

Reaching 12% as to September 2018, the Portuguese banking sector NPL ratio is up to three times higher than the European Union 4% average.

Original Story: ECO |Lusa
Photo: Novo Banco
Edition:Prime Yield

Eurozone banks shed €30bn of NPL in 3rdquarter

8 February, 2019

The euro zone’s top banks shed some € 30 billion worth of unpaid loans (NPL) in the third quarter of 2018, in a new sign that European Central Bank pressure to clean up their balance sheets is bearing fruit.

The ECB wants banks to sell or provision for the bad debt they’ve inherited from the last recession so they can focus on extending fresh credit and are better prepared to withstand any new downturn.

ECB data showed NPL and advances held by the euro zone’s 107 top banks fell to € 627.7 billion, or 4.17% of the total, in the three months to September.

That was down from € 657.15 billion, or 4.40% of the total, and the end of the second quarter.

Large falls were seen in Cyprus, Italy, Greece, Portugal and Spain, and also in Germany. Even though, soured credit inherited from the last recession still accounted for a fifth of the loan book of Cypriot banks and for 40% of bank credit in Greece.

Original Story:Reuters | Francesco Canepa
Photo: FreeImages.com/Szymon Szymon
Edition:Prime Yield

Portugal’s NPL stock is still too high, says ESM

8 February, 2019

Despite all the progress towards the reduction its NPL stock pile since 2016’s peak, Portugal’s bad debt level is still among the highest within the Eurozone, warns the European Stability Mechanism (ECB), while recalling the need to further enhance the efforts to reducing it.

At a conference organized by Fitch in Lisbon a few days ago, Matjaž Sušec, the assistant director of the Strategy and Institutional Relations of the ESM, noted, that the Portuguese banking sector is definitely more resilient, «but some of the challenges are still there».

Four recapitalizations allowed for the banking system to go through a major «clean-up» of its accounts. The NPL level is now one third below the peak recorded in 2016, and in 2018, the country’s banking system presented its best results since the crisis. However, regardless of these signs of progress «Portugal still presents very high levels of NPL, one of the highest in the Eurozone», Sušec added.

For the ESM’s director, «enhancing asset quality a very important step if we want to improve the banking system’s resilience and its capacity to finance the economy».

The specialist also noted that the debt pile of the country was still very high, but that the current recovery has allowed for the country to have a larger fiscal buffer, as fiscal revenue increases and debt progressively decreases.

During his speech, the ESM’s representant noted that Portugal has reinforced its status as a country which «successfully overcame the crisis» and that the country’s positive economic performance has opened the door to new financial markets, making it «less vulnerable to shocks».

Original story:Dinheiro Vivo | DV/Lusa
Photo: FreeImages.com / Svilen Milev
Translation & Edition:Prime Yield

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