NPL&REO News

European Commission warns Italy, Cyprus and Greece over high debt and bad loans

7 March, 2019

Italy, Cyprus and Greece are all experiencing «excessive» imbalances in their economies because of high debt and the number of nonperforming loans on their bank balance sheets, the European Commission (EC) said last February 27^th.

Brussels issued the warning as part of its European Semester Winter Package, which scrutinizes the economies of EU countries. The package serves as a basis for further talks between Brussels and the bloc’s capitals about their reform targets and whether their spending plans respect EU rules.

According to this report, Bulgaria, France, Croatia, Germany, Ireland, the Netherlands, Romania, Portugal, Spain and Sweden are also experiencing some economic imbalances, albeit less serious than Cyprus, Greece and Italy.

Commission concerns about high public debt were the common theme in this package, amid consistent warning that the EU is facing an economic slowdown in the near future. Earlier, in February, the Commission downgraded its growth forecast for the single currency bloc in 2019 and 2020 thanks to global trade tensions and China’s slowing economy.

EC Vice President Valdis Dombrovskis said during a press conference in Brussels that it is «worrying» that countries with high government debt have «not used the good times» to decrease their public stockpiles and build fiscal buffers to defend against an economic downturn.

«The European economy is experiencing its seventh consecutive year of economic expansion. Yet growth is slowing down», he said.

Greek woes not over

The label «excessive» is a red flag for national economies that are vulnerable to economic and financial shocks. And Athens’ imbalances were expected to be labelled as «excessive» since Greece exited its €86 billion bailout program in August with a debt pile of around 180% of GDP.

«This should not surprise anyone», Finance Commissioner Pierre Moscovici said.

The EU’s executive arm nonetheless described Greece’s financial sector as «vulnerable» due to a «very large» stock of bad loans that its lenders hold. «More progress» is also needed in Cyprus, which is struggling with an excessive amount of bad loans in its banking sector.

Public debt is a heavy burden for several EU countries, such as Spain, Portugal, and France — although they managed to escape the “excessive” label.

Part of that has to do with the fact that Madrid has enjoyed “robust” economic growth and Lisbon has decreased its bad loans stockpile and government debt.

Original Story: Politico | Silvia Sciorilli Borrelli
Photo: FreeImages.com/Takis Kolokotronis
Translation and Edition: Prime Yield

Bankia hires KPMG to sell 3 NPL and REO portfolios worth €1 billion

6 March, 2019

Bankia is on track to meet one year in advance the goal of freeing itself from the real estate heavy burden that is still in its balance sheets, by hiring KPMG to sell 3 portfolios involving nonperforming loans (NPL) and real estate owned (REO) assets worth €1 billion. The goal is to complete the sales in the mid-year.

The Spanish bank nationalized in 2012 set the goal to clean from its sheets almost €9 billion in nonperforming assets related to real estate between 2018-2020. Along 2018 alone Bankia sold bad assets worth €6 billion. And this year goes in the right direction to achieve its aim a year before the scheduled.

In a more advanced sales stage, one of the portfolios that are now in the market includes developer’s NPL with a gross book value of €500 milion. The second portfolio to be put for sale involves unsecured NPL worth €200 million. According to El Confidencial, a third portfolio is likely to enter in the market soon, constituted of REO (most of it land and dwellings) in the value of hundreds million euros, whose dimension is yet to define.

Original Story: El Confidencial | Jorge Zuloaga
Photo: Bankia
Translation and Edition: Prime Yield

NPL’s sales from Brazil’s top banks gain momentum in 2019

6 March, 2019

The credit recovery market in Brazil is seen gaining momentum in 2019 with the country’s largest banks expected to put 40 billion Brazilian reais of non-performing loans (NPL) up for sale, Valor Econômico reported, citing forecasts from managers who specialize in bad loan trading

Banks put about 30 billion reais in face value of delinquent loans up for sale in 2017 and 2018 each, according to the report.

The projected uptick is based on Caixa Econômica Federal’s plans to revisit the market this year after a court ruling suspended such sales for the state-run bank in mid-2016. The company is reportedly in the final stages of securing approval to resume the sales.

The strategy of Brazilian banks has reportedly been to partner with managers who specialize in debt recovery and sell the oldest tranches of their nonperforming retail loan portfolios.

In October 2018, Banco Bradesco SA agreed to purchase 65% of asset manager RCB Investimentos SA’s NPL servicing platform in Brazil. In doing so, it joined fellow Brazilian lenders Itaú Unibanco Holding SA, Banco Santander (Brasil) SA and Banco do Brasil SA, all of which either own or have stakes in similar asset recovery firms.

«Selling portfolios is more a matter of efficiency and focus» as opposed to revenue, Valor quoted Eurico Fabri, Bradesco’s vice president of retail banking, as saying.

Although Brazil’s debt recovery market is expected to grow this year, current unemployment levels suggest improvement will only solidify in the years to follow as the country’s economic situation continues to improve.

Original Story: S&P Global Intelligence| David Feliba
Photo: FreeImages.com/CesarFermino
Edition: Prime Yield

Greek banks remain cautious about the securitization of NPL

6 March, 2019

Greek banks remain cautious about the two alternative proposals for the securitization of non-performing loans (NPLs) presented to them by the Hellenic Financial Stability Fund (HFSF) and the Bank of Greece. They expect to see details and want to know whether one or both of them obtain European Commission clearance, local bankers told a forum in Athens on Friday.

The Greek credit system has a large backlog of non-performing exposures, amounting to some €85 billion in end-September 2018, or about 45% of all loans.

To tackle this problem of the credit sector and the economy in general, the HFSF has proposed a plan providing for the creation of bonds out of restructured NPLs (so-called securitization) whose repayment will be guaranteed by the state in case borrowers are in distress even after the restructuring of the loans.

Simultaneously, the country’s central bank is tabling another plan for the creation of a special purpose vehicle to which a large part of the banks’ NPLs would be transferred along with the lenders’ deferred tax credits.

Speaking at an event on NPL investment held in Athens, Bank of Greece Deputy Governor John Mourmouras said the two plans complement each other, adding that «the securitization schemes are the silver bullet for the NPL problem» because «a more hands-on solution» is required.

Both plans will be voluntary, but banks remain reserved toward them at this stage. Spealing at the same event, Charoula Apalagaki, secretary general of the Hellenic Bank Association, stressed that «We have not yet received the final drafts of the plans, and you know the devil is in the detail. It is fine to have more tools, to give banks the option to use one or the other, but the plans have not matured yet and we have not yet received feedback from (the European Commission’s) Directorate-General for Competition», she said.

Theodore Athanassopoulos, Alpha Bank’s executive general manager for NPL wholesale, was also cautious about the securitization plans, stating that «different banks have different portfolios, and therefore different needs,» but added that «the Bank of Greece scheme has a great potential for sales of loans».

Original Story: Ekathimerini | News
Photo: Bank of Greece
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

Brazil’s Government claims the need of pension system reforms to avoid recession

4 March, 2019

Brazil’s Economy Ministry has just released a report on which warns that the economy will slip into recession next year and official interest rates could more than double unless Congress approves measures to reduce the deficit in the country’s pension system.

The warning comes days after President Jair Bolsonaro presented his ambitious social security reform plan to Congress, which aims to save over 1 trillion reais ($295 billion) in the next decade.

Overhauling the creaking social security system is seen as critical to shoring Brazil’s public finances, boosting investor confidence, fostering growth and keeping interest rates and inflation under control, most economists say.

In its first official forecast on the potential impact on the economy over the next five years of reform or no reform, the Economy Ministry laid out starkly contrasting scenarios.

«In the event of no pension reform, GDP growth in 2019 will be 1% lower and Brazil will enter recession in the second half of 2020, approaching the level of losses seen in the 2014-2016 period», the ministry’s economic policy division warned in the report.

It said growth this year would slump to 0.8% from 1.3% last year — far weaker than the market consensus of around 2.5% and much worse than the 2.9% «best case» scenario of reform being passed.

Recessionary forces would also deepen over coming years if the pension system stays unchanged, the ministry said. The economy would shrink by 0.5% in 2020, by 1.1% in 2022 and as much as 1.8% in 2023.

The document also adds that benchmark interest rates will soar past 11% by year end from the current record low of 6.50% , and as high as 18.5% by 2023. Most economists expect rates to be on hold for the rest of this year.

But if reform is passed, growth will accelerate, job creation will surge and interest rates will fall, the Economy Ministry predicted.

The benchmark Selic rate could be reduced to a new low of 6.0 % later this year while the economy could create as many as 8 million new jobs by 2023, it said.

Economists have already factored in pension reform into their forecasts and say the outlook is not that strong even if something is approved this year, most likely a diluted version of Bolsonaro’s bill.

Corporate and household balance sheets have not been fully repaired since the 2014-16 recession, the international picture is cloudy, and not everyone is convinced the new administration will deliver on its pledges.

Original Story:Reuters |Jamie McGeever
Photo: FreeImages.com/Bruno Leiva
Edition:Prime Yield

Piraeus Bank aims to reduce NPLs by €15 billion until 2021

4 March, 2019

Greek banks still have the highest NPL (non-performing loans) ratio across the euro zone at 44.8%, according to the most recent figures from the European Parliament. And because so, Christos Megalou, CEO of Piraeus Bank, calls on lenders to do more on reducing the country’s bad debt, despite all the significant steps already taken to bring down the level of NPLs.

In an interview to the US media CNBC, the responsible told «the four systemic banks have agreed among themselves to reduce the non-performing loans between now and 2021 by €50 billion. This is almost 28% of the GDP [gross domestic product] of this country. It is a significant percentage vis-à-vis the actual percentage being produced by this country. I would like to see this happening and I would be very happy if we are able to achieve these targets as we have set ourselves out to achieve».

In specific the case of Piraeus, one of Greece’s top banks, the aim is to reduce the NPLs by €15 billion until 2021. This after having reduced bad loans by €5 billion in 2018, the CEO said in Athens.

In the same occasion, the head of Piraeus Bank revealed that there has been strong interest from international funds in buying Greek NPLs. «We had situations where funds were competing and in the process of competition they had to pay a significant amount of money in due diligence to be able to bid for these assets. We are very happy as principal selling those loans of the level of competition and the level of activity we see in the NPL market. I would dare to say that one of the most interesting asset classes in Greece this days is the non-performing loans».

Greece put an end to nearly 10 years of financial help after it ended a third financial rescue in August and has vowed to stick to stringent fiscal targets in the coming years in exchange for some debt relief.

Original Story:CNBC | Silvia Amaro
Photo: Piraeus Bank
Edition:Prime Yield

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

OECD points out high NPL weight as one of the risks to Portuguese Economy

4 March, 2019

In a recent 140-page report about Portugal, the Organization for Economic Cooperation and Development (OECD) identifies the high weight of the non-performing loans (NPL) within the banking system as one of the main risks for the country’s Economy, despite “market improvements” over the last few years.

According to OECD, Portugal’s economy has moved back to pre-crisis levels and is expected to grow by about 2% a year between 2018 and 2020.

Comparatively low living standards, however, mean many Portuguese perceive themselves to be worse off than a decade ago.

However, the club of 36 rich nations recognizes the economic conditions in Portugal had «improved markedly» over the past few years, with unemployment falling 10% points since 2013 to below 7%, «one of the largest reductions in any OECD country over the past decade».

Strong exports had sustained growth in the years following the global financial crisis, underpinned by a tourism boom: travel and tourism exports grew at an annual rate of more than 10% between 2010 and 2017, and by 2017 accounted for almost half of all service exports, the report said.

Despite this growth, the poverty rate of the working age population remained high and subjective perceptions of wellbeing were below pre-crisis levels. This reflected «modest living standards compared with other OECD countries»and little convergence with those economies over the past few decades, the report added.

Since 2014 Portugal has been recovering from a deep recession that followed the European sovereign debt crisis and a tough economic adjustment programme overseen by the EU and the International Monetary Fund.

Further employment gains and rising real wages were likely to underpin future growth in consumption. But an expected slowdown among Portugal’s main export markets would act as a headwind to further export growth, the report added.

An increase in interest rates — potentially arising from a normalisation of monetary policy as the European Central Bank phases out its government bond-buying programme — posed a risk to business and household spending, according to the OECD.

Improvements in the fiscal balance had contributed to a fall in the public debt-to-national output ratio from 130.6% in 2014 to about 121% last year. The ratio, however, remained one of the highest among developed economies, reflecting a debt burden that «still limits the government’s ability to respond to future economic shocks».

Bank vulnerabilities also weakened the resilience of the Portuguese economy, according to the OECD. While NPL as a percentage of total lending have been reduced by more than 35% since their peak in 2016, the level of problem bank debt remained one of the highest among OECD countries.

Other risks included Brexit and rising protectionism, the report said. «Any significant increase in policy barriers in international trade» would also have a detrimental effect on Portugal as a «small, open economy», the OECD said.

Original Story: Financial Times | Peter Wise
Photo: FreeImages.com / Armindo Caetano
Edition:Prime Yield

Newer Posts →