NPL&REO News

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

New housing loans hit the lowest level from the last 11 months

25 March, 2019

In January 2019 the Portuguese banks grant €747 million in housing loans, hitting the lowest value since February 2018, data from the Bank of Portugal show.

According to the statistics now released by Portugal’s central bank, this figure is €156 million lower than the €903 million in housing loans made available in December.

After three consecutive months of growth in the housing loans granting, this upward trend seems to reverse within the start of the new year, however, it should be noted that the month of January is a period traditionally marked by a slowdown in lending.

Original Story: ECO News
Photo:FreeImages.com/Svilen Milev
Edition:Prime Yield

Property prices: buyer-seller expectation gaps widen to 22%

21 March, 2019

The average price of property rocketed by 15.4% in the space of a year in Portugal. But while real estate continues to result in relatively decent profits for sellers, new data also indicates that their expectations of the property’s worth and its actual selling price have widened further this past year.

Expectations in Portugal are usually that a potential buyer of property will offer less than the price listed by the seller.

A decade ago, prior to the economic crisis, the so-called buyer-seller expectation gap stood at around 10%. But since the onset of the well-documented property market boom, sellers appear to have even greater unrealistic prospects of their property’s actual value. In Lisbon, this differential between buyers and sellers has now climbed to 22%, while in Porto, this figure has risen to as high as 30%.

These figures were calculated by real estate market analysts Confidencial Imobiliário (CI), throughout comparing declared values once property deeds are signed against values contained on the Residential Information System, showing listing prices.

Other figures published a few days earlier showed that average property prices in Portugal ballooned by 15.4% in the space of 12 months leading up to December 2018.

Accumulated increases since late 2013, now stand at 46% CI said, yet sellers now appear to have an even greater distorted perception of the market values of their property.

However, this is far from meaning that we are seeing the end of rising property prices in Portugal, only at a more sedate rate. A view that is further substantiated by the recent Portuguese Housing Market Survey, from CI, which found that prices are set to start levelling out, though maintaining an upward curve.

Meanwhile, rental properties have also continued to record price increases, and rose by 37% in 2018 when compared with the previous year. The average rent in Portugal currently stands at €1,106/month. The five districts with the highest average rental prices in 2018 are Lisbon, Porto, Faro, Beja and Setúbal.

Original Story:The Portugal News | Brendan de Beer
Photo: FreeImages.com/Hugo Humberto Plácido da Silva
Edition:Prime Yield

Startups in February up 23.9% as insolvencies went down 1%

19 March, 2019

The number of new companies formed in Portugal in February was up 23.9% on the same month a year earlier, at 4,668, while the number or insolvencies was down 1% at 494, according to a study by business information service Iberinform.

According to the research from the subsidiary of Crédito y Caución, a company specialising in credit insurance for the domestic and export markets, there were five fewer insolvencies in February than a year earlier, and 899 more new companies.

In the first two months of 2019 taken together, the number of new companies created was up 25.1% at 11,330.

The cumulative total for insolvencies was up 3.5% on the same period a year earlier, at 1,007, although this total was lower than the same period in both 2016 and 2017.

Original Story:The Portugal News Online | Lusa
Photo: FreeImages_Matthew Bowden
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

Novo Banco plans to sell even more NPL in 2019

7 March, 2019

Portugal’s Novo Banco will maintain the efforts towards the reduction of its nonperforming loans (NPL) stockpile along this year, preparing to launch soon the bidding process for another two bad debt portfolios: the projects “Nata 2” and “Viriato 2”.

«Yes, our aim is to close more NPL sales this year», said Novo Banco President, António Ramalho, during the bank’s annual results presentation.

These portfolios arrive into the market a pair of months after the sales completion of projects “Nata” and “Viriato”, which took place in the end of 2018. The larger NPL portfolio to be sold in Portugal ever, Project Nata was divided into two tranches: one with a gross book value of €500 million and other, larger, of €1.2 billion. Besides this, in the same period, the Portuguese bank have also sold its Project Viriato, involving more than 9,000 real estate owned (REO) assets.

Considering the «success» of these «toxic assets» sales, António Ramalho announced that «Yes, we will have the Nata 2 and the Viriato 2», ensuring that this will be another year for the bad debt shrinking.

«We have to do a very clear and precise NPL plan and deliver it to ECB. Its part of our programme», explained the president of the bank which was bought by US’s Lone Star in 2017 after former Banco Espírito Santo collapse in 2014. The goal, stresses António Ramalho, is that «the bank’s NPL ratio reach 5%», in line with ECB’s targets. As for the «bad bank» in which remains the burden legacy of Banco Espírito Santo, the NPL ratio should stand «close to 12%».

As revealed in the same occasion, Novo Bank recorded losses of €1.412 billion in 2018.

Original Story:Jornal de Negócios | Rita Atalaia
Photo: Novo Banco
Translation and Edition: Prime Yield

Mortgage concession boosts up to €10 billion in 2018

7 March, 2019

The mortgage concession boosted in Portugal along 2018, reaching almost €10 billion and hitting an eight-year high, informed Banco de Portugal (the Portuguese Central Bank).

According to the entity led by Carlos Costa, in December the national banks granted €903 million for mortgage loans, alone. This is the highest value registered over the past five months, with the total volume of mortgages granted in 2018 rising to €9.835 billion.

The figure represents a new high since 2010, the year before the Portuguese bailout, confirming an upward trend on mortgage concession over the last few months, reflecting an annual growth 19% in 2018 vis-à-vis 2017.

Original Story: Eco | Eco News
Photo: FreeImages.com/Miguel Saavedra
Edition:Prime Yield

More and more Portuguese consumers seek for credit cards

6 March, 2019

The growing consumer confidence, spurred on by the economic recovery, are supporting the increasing demand for credit cards by the Portuguese, who rely more and more on their cards to purchase items for which they might not necessarily have the money.

According to new data published by the Bank of Portugal, the amount of Portuguese seeking for credit from banks has also risen considerably, with the number of people who secured loans to buy cars going up in 2018, by 120,000.

In terms of credit cards, the increase of those in debt climbed by 43,000 with 2.29 million people currently using them to make purchases.

This is now the highest number of people in debt with their credit card companies since records were first taken by the Bank of Portugal in March 2009.

The amount of debt outstanding has also climbed strongly, and now sits at €3.25 billion, another new record.

The amount owed to financial institutions for vehicle credit has ballooned to a record high, and has reached €6.1 billion euros this year. Overall, 840,000 people are in debt with banks having secured credit to purchase a car.

The Bank of Portugal has warned of a steep increase in consumer credit, explaining that this is being driven by a reduction in the unemployment rate, and an increase in wages, though interest rates on these types of credits remain high. The banking regulator however pointed to increased competition among financial institutions having resulted in them easing on the spreads levied on top of existing interest rates.

This follows after the general approval of loans in Portugal reached a 15-year high in 2018. Figures indicate that a credit of € 4.66 billion was issued, for an average of €12 million a day.

Despite concerns over the ballooning debt among consumers, the number of people unable to meet their monthly repayments actually dropped in 2018 to their lowest in almost a decade.

Nonetheless, 137,000 people are unable to pay the minimum monthly value demanded from their credit card companies, while 61,000 people have defaulted on their car repayments.

In terms of mortgages, the number of home owners who are unable to meet their repayments has fallen to below 100,000 for the first time since 2009. But despite calls on banks to employ stricter rules in issuing mortgages, Portuguese were handed close to €10 billion to purchase real estate last year, which is up almost 20% on 2017.

Original Story: The Portugal News | Brendan de Beer
Photo: FreeImages.com/ Lotus Head
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

Santander sold Cerberus the €600 million “Project Tagus”

11 February, 2019

Santander Portugal closed the sale of the €600 million “Project Tagus” to an affiliate of US Cerberus Capital Management.

According to information gathered by the Portuguese news platform ECO, the transaction was closed in December 2018; having a positive impact of € 50 million for the bank’s results last year.

This portfolio comprises toxic assets belonging to former Popular Portugal bank, having sparked the interest of Apollo, Bain Capital and Arrow Global.

During the bank’s results presentation, CFO Manuel Preto explained that these real estate assets and loans became Santander Totta’s property with the integration of Popular Portugal at the end of 2017. «We tried to quickly alienate these assets, because we believe the bank’s management should be focused on granting new credit to the economy and not managing portfolios which are already adequately provisioned and which do not add much to the bank’s results», quotes the same source.

Original Story: Iberian Property | Ana Tavares
Photo: Santander
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

Portuguese REITS have come into force

7 February, 2019

Starting February 1^st, a REITs regime has come into force in Portugal.

Known as SIGI – Sociedades de Investimento e Gestão Imobiliária, the Portuguese REITS are regulated by the legislative decree nº19/2019, published in Diario da República on 28^thJanuary.

This legislation sets a minimum share capital of €5 million to create a SIGI, which has to be listed into the stock market. Among all the other requirements which can be found in the diploma, for instance these societies have also a limited indebtedness level correspondent to a maximum of 60% of its total assets value.

Aiming to boost even further the real estate investment activity in Portugal, and particularly the home rental market, the SIGI portfolios must include property assets dedicated rental or to be explored in other ways of long term economic use. Even though the residential market is appointed as its main focus, it is not obligatory as the SIGI may also invest in other asset classes, such as retail, logistics or offices, for instance.

Original Story: Vida Imobiliária | Fernanda Cerqueira
Photo: FreeImages.com/Hugo Humberto Plácido da Silva
Translation and Edition:Prime Yield