NPL&REO News

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

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

Portuguese Banks with potential to securitize NPL

13 February, 2019

The Portuguese banks have potential to complete more non-performing loans portfolios securitization operations, following the European trend on using these financial instruments, noted the rating agency DBRS.

According to Alessio Pignataro, Senior Vice President, European ABS – Global Strucutured Finance, Portugal, Ireland and Italy are the countries were DBRS expects the banks to use these financial instruments to reduce a still high volume of non-performing loans (NPL), besides the new entries of Spain, Greece, Cyprus and, potentially, the United Kingdom.

«From a banking perspective, this measure enables faster NPL reduction and frees the management teams to focus on new businesses», Elisabeth Rudman, managing director and head of EU FIG told to Portuguese news agency Lusa, on the sidelines of a DBRS event about the theme in London.

Since 2016, the Portuguese banks completed two deals, a small number when compared to the 20 NPL securitization done by Italian banks and four other by Irish banks during the same period.

One of the Portuguese deals was led by Caixa Económica Montepio Geral when it sold the €580.6 million NPL portfolio “Evora Finance” in 2017, and the other one was closed last year by Santander Total bank, when disposed a €480.7 million NPL portfolio. DBRS rated both transactions “BBB” (low), noting though that “Évora Finance” is performing well above the initial forecast.

The rating agency also states the European Banks have made substantial progresses in reducing the huge NPL pile accumulated since the financial crisis, but several countries whose banks still have huge levels of NPL «still have a long way to go».

Legal and tax reforms were implemented in Portugal to help dealing with this problem but, in general the European banks keep struggling to collect outstanding debts and foreclose mortgages, besides the low yield profitability and pressures over the capital levels.

Original Story:Diário de Notícias | Lusa
Photo: Free Images.com /Alfonso Romero
Edition and Translation:Prime Yield

Bain Capital buys the €850 million bad credit portfolio “Atlantic” from Caixa

12 February, 2019

After its 2017 debut, throughout buying a €500 million portfolio, the nonperforming asset manager Bain Capital keeps investing in Portugal, having now closed the acquisition of project “Atlantico”, with a gross book value of 850 million, from the Portuguese bank Caixa Geral de Depósitos.

In its Report and Consolidated Accounts from 1^stSemester 2018, the Portuguese public bank announced it would be selling the non-performing loans portfolio named “Atlântico”. In the occasion, Caixa’s president, Paulo Macedo, stated that the public offer had attracted several potential buyers. According to him, this transaction would allow Caixa’s NPL ratio to be under 10%.

After completing two transactions, Bain Capital admits its plans to keep investing in Portugal. «I assume we’re going to [buy more]. (…) We like the fact this is a small market, and, because of that, some of our major competitors don’t participate that frequently», Alon Avner, Bain Capital Credit’s Europe responsible, explains.

Original Story: ECO
Photo: Caixa Geral de Depósitos
Translation and Edition: Prime Yield

Spanish Banks must improve historic lows profit margins

11 February, 2019

The improvement of their profit margins, still at historic lows, is one of the main challenges posed to the Spanish banks in 2019, according to ratings agency Standard & Poors (S&P).

Looking forward, S&P predicts more mergers among medium sized Spanish banksthis year, given the low profit margins that the sector is suffering, and that most are trading in the stock market below their book value. S&P believes that Spanish banks are well positioned, with sanitised balance sheets and favourable perspectives in terms of credit quality. However, the agency points out in its report that, after years of rating upgrades for Spanish banks, which have put them «very close to the levels of December 2011, and even before the crisis», 2019 could also see some downgrades. The agency predicts that in 2019 toxic assets on the balance sheets will continue to be reduced and that the main challenge will remain improving profit margins which remain at historic lows. In fact it is this low profitability which will drive consolidation this year which will help achieve synergies, economies of scale and cost cutting.

At the European level, S&P believe it is very unlikely that there will major cross-border mergers this year, despite the political interest in Europe that there should be. The report signals that «Banking Union is still not complete and the execution risks are greater than in domestic consolidation, where it is easier to find synergies».

Finally, S&P rules out 2019 being the year in which the State gets out of Bankia, where it controls 61.4% of the capital. Rather it predicts a «very gradual» process of withdrawal.

Original Story: The Corner
Photo: FreeImages.com /Xexo Xeperti
Edition:Prime Yield

IMF insists reduction of Greek bank’s NPL must be expedited

11 February, 2019

The International Monetary Fund (IMF) has just reiterated the need to undertake coordinated steps to expedite the reduction of nonperforming loans (NPLs) held by Greek banks.

Greece’s creditors have long cited NPLs as a major vulnerability of the Greek economy.

Speaking during a press briefing in Washington (USA9, IMF spokesman Gerry Rice sid that the organization’s executive board will in March discuss the report drafted by the IMF mission which recently visited Athens within the context of Greece’s post-bailout surveillance.

Original Story: Ekathimerini
Photo: FreeImages.com/Jonte Remos
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

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

Italian banks struggle to pacify ECB NPL push

8 February, 2019

Only two weeks into his new job as the eurozone’s single banking supervisor, Andrea Enria is already at the sharp end of rebukes from Italy’s populist government.

In mid-January, Monte dei Paschi di Siena, now majority state-owned, announced details from the December draft version of its annual supervisory review and evaluation process (SREP). This included an unexpected European Central Bank (ECB) recommendation to bring coverage of its bad-debt pile up to 100% within seven years – something the market thought only stronger banks would have to do.

For Italy’s deputy prime minister Matteo Salvini, the ECB might have been exerting unfair pressure on the country. «The new attack by the ECB supervisor on the Italian banking system and Monte dei Paschi shows once again that the banking union … not only does not make our financial system more stable, but it causes instability,» says Salvini, according to Reuters.

Italy has Europe’s biggest non-performing-loan (NPL) pile, but this coverage policy is eurozone-wide – and, anyway, Italian bank stocks soon recovered. The large and mid-tier Italian banks all issued statements denying a «significant» or «material» impact on their financial forecasts, even though the ECB is also pushing them to reach 100% NPL coverage earlier than many investors imagined.

Gross bad debt in Italy alone still amounts to about €200 billion, after all, with average coverage ratios ranging from about 45% to 60%, according to UBS.

Moving towards provisioning 100% of existing NPLs will cost Italian banks on average about 47 basis points of capital annually for the next two years alone, with the total cost (€63 billion) about three times more than for the laxer targets the market had assumed, according to Giovanni Razzoli, banks analyst at Equita in Milan. «There will be an increase in banks’ coverage from these requests,” he says. «The banks are trying to downplay the situation, but the impact on some is quite significant».

Original Story:Euromoney | Dominic O’Neill
Photo: FreeImages.com/ Matic Zupancic
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

Greece: Political storm, NPLs delay issue

8 February, 2019

Greece’sFinance Ministry is putting off the issue of a five-year bond, which is all set-in technical terms, until the domestic political dust settles and the effort to reduce the credit sector’s bad-loan stock results in a breakthrough.

The anticipated conclusion of the parliamentary process over the Prespes agreement will remove one of the two main obstacles blocking Greece’s return to the money markets, but the issue of the nonperforming loans still needs to be resolved before a new bond issue.

The milestone that Finance Minister Euclid Tsakalotos has set for the process to start in the markets is the submission to the European Commission’s Directorate General for Competition (DG Comp) of the plan for the reduction of banks’ NPLs processed by the Hellenic Financial Stability Fund and presented by the minister to the creditors’ mission chiefs this week.

The government expects that to give the markets a strong signal that the process of bringing NPLs down to a more manageable level is under way.

The government hopes to have the plan submitted before the end of February, as Brussels’s approval will formally open the way for the implementation of the HFSF blueprint, granting political points to the ruling party ahead of the general election. As Fitch stressed this week, the NPL reduction plan could be a game changer for the sector, decisively helping toward the restoration of confidence.

The planning of the Public Debt Management Agency provides for the issue of a five-year paper whose value will not exceed 2-3 billion euros. Analysts estimate that the interest rate could come to 3.5-3.75%, noting the favourable climate in the markets that the government should make the most of.

As Swiss daily Neue Zuericher Zeitung noted, the hunt for yields has resumed internationally, and the next one to benefit from that could be Greece, following the recent issues by Italy, Ireland, Portugal and Spain. After all, the secondary market rate of Greece’s five-year bond has dropped to six-month lows in the last 10 days.

Original Story:Ekathimerini |Eleftheria Kourtali
Photo: FreeImages.com/Takis Kolokotronis
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

Novo Banco puts its focus in NPL and Real Estate sales

7 February, 2019

Focused on cleaning its balance sheets and in the reduction of its NPL stock, Portuguese Novo Banco has advanced with the sale of a NPL portfolio worthing €1 billion and of other €500 million in real estate assets.

According the Jornal de Negócios, which quotes Debtwire, the Portuguese bank led by António Ramalho is already receiving proposals from financial advisores for the placement of the real estate portfolio in the market, which is expected to happen still in this quarter. In the race to advise this sale are well known names such as Alantra, Deloitte and PwC, among other. The sales process is expected to be completed by June.

So, after “Project Nata”, a NPL portfolio with a gross book value of €2.15 billion sold last December to a JV from KKR and LX Partners, the bank is now putting for sale the “Project Nata 2”, other NPL portfolio worthing €1 billion.

Also, in progress is the sale of “Project Viriato 2”, a €500 million real estate portfolio consisting mainly of commercial and industrial assets spread in the Lisbon region, writes the same publication, remembering that the disposal of “Projecto Viriato 1” generated a sales result of €388 million.

Original Story: Idealista | Idealista News
Photo: Novo Banco
Translation and Edition:Prime Yield

IFIS NPL acquires €1.16 bn NPL portfolio from Monte dei Paschi di Siena

28 January, 2019

IFIS NPL, the company owned by Banca IFIS Group dedicated to the acquisition, managing and transformation of non-performing loans (NPL), bought from Monte dei Paschi di Siena, a NPL portfolio with gross book value of €1.16 billion.

The portfolio acquired includes over 83,000 debtors. Ca. 16%, equal to €192 million gross book value, is represented by consumer loans. The remaining 84%, ca. € 967 million gross book value, consisted of unsecured small ticket banking NPLs.

In a note, Banca IFIS confirms its dynamic strategy in purchasing and managing NPLs.

After buying in the third quarter eight portfolios with a gross book value of ca. €1.83 billion, in the fourth quarter of 2018 the Bank purchased, in addition to the above mentioned MPS’s transaction, other four portfolios with a total gross book value of €93 million and ca. 30,000 positions. In 2018, total purchases amounted to €3.6 billion gross book value, in line with company targets.

As a result of these transactions, IFIS NPL’s portfolio amounts today at €15.7 billion (gross book value) with over 1.6 million positions.

Original story: Globe News Wire | PR
Photo: IFIS Finance
Edition: Prime Yield

Eurozone banks expect slower borrowing in the first quarter

25 January, 2019

The credit demand in the Eurozone should ease in the first quarter, as factors braking the single currency area loom larger, says the latest European Central Bank (ECB) bank survey.

«Net demand continued to increase across all loan categories in the fourth quarter of 2018, but banks expect some moderation in demand over the next three months», the ECB said in a statement.

Over the fourth quarter of 2018, low interest rates encouraged both firms and households to borrow, with businesses using cash for investment and mergers and acquisitions, while a rising housing market spurred individuals to seek mortgages.

During the first quarter of 2019, firms’ and households’ demand for loans should be higher, but banks expect some moderation in demand, forecasts the same report.

Banks’ non-performing loans have tightening impact on credit standards

With regard to the impact of non-performing loans (NPLs) on banks’ lending policies, the report shows that euro area banks’ NPL ratios had a tightening impact on their credit standards for loans to enterprises and housing loans over the past six months.

Looking forward, over the next six months, they expect a net tightening impact of their NPL ratios on credit standards across all loan categories. Banks’ NPL ratios affected their lending policies over the past six months mainly through their impact on access to market financing.

Original story: The Express Tribune | AFP
Edition: Prime Yield

National Bank of Greece ready to sell-off €3 bn NPL portfolio

22 January, 2019

The National Bank of Greece (NBG) is ready to sell-off roughly €3 bn worth of non-performing loans (NPL), from which about €2 bn correspond to loans granted to companies and the other €1 bn to consumer loans.

The first tranche, known in the local market as the “Symbol Project”, includes collateral of approximately 5,000 commercial properties.

NBG is expected to hold an “investment day” in London in March, where, among others, it will announce new targets for reduction of NPLs and NPEs, along with the sale of subsidiaries, efforts to reduce operating costs and what the oldest Greek commercial bank calls its presence in the post-bailout period.

Original Story:Naftemporiki
Photo: National Bank of Greece
Edition: Prime Yield

European banks improve their resilience while profitability remains weak

21 January, 2019

The European Banking Authority (EBA) has just published its Risk Dashboard, which confirms improvements in both asset quality and capital ratios in the EU banking sector in the third quarter (Q3) of 2018, while profitability remained subdued.

Together with the Risk Dashboard, which summarizes the main risks and vulnerabilities in the EU banking sector using quantitative risk indicators, the EBA published the results of its Risk Assessment Questionnaire, which includes the opinions of banks and market analysts on the risk outlook collected in autumn 2018.

The document shows that European Banks’ capital ratios remain high with a modest increase since Q2 2018. The CET1 ratio on a transitional basis increased from 14.5% in the last quarter to 14.7% in Q3 2018 as the result of both an increase in CET1 capital and a decrease in total risk exposures. Banks representing 99.6% of total assets have a CET1 ratio above 11%. The fully loaded CET1 ratio increased to 14.5% in Q3 2018.

Good news for the quality of the EU banks’ loan portfolio, which has improved further. In Q3 2018, the ratio of non-performing loans (NPLs) to total loans kept the downward trend and stood at 3.4%, its lowest level since the NPL definition was harmonized across European countries in 2014.

This declining trend of the NPL ratio is due to the growth of total loans as well as due to the continuous decline of NPL, which now stand at €714.3 bn. Looking forward, banks expect further improvement in the quality of their portfolios, while market analysts seem to be more cautious on the asset quality outlook. Profitability in the EU banking sector needs to improve further.

The average return on equity (RoE) has been stable at 7.2%, with the share of banks with RoE above 6% decreasing from 67.1% in Q2 to 62.8%.

The answers to the Risk Assessment Questionnaire show that banks expect profitability to remain subdued, with only about 30% with a positive outlook in the next 6-12 months. In order to improve profitability, banks target increasing fees and commission income and decreasing operating expenses. The loan to deposit ratio has remained broadly stable.

In Q3 2018, the ratio increased marginally by 10bps to 118.4%, driven by a growing numerator as well as denominator. The leverage ratio (fully phased-in) remained stable at 5.1%. Asset encumbrance ratio increased slightly to 28.2% from 28% in Q2 2018. The liquidity coverage ratio (LCR) improved to 148.5% in Q3 2018, the highest value since Q3 2016 and well above the 100% requirement.

The figures included in the Risk Dashboard are based on a sample of 150 banks, covering more than 80% of the EU banking sector (by total assets), at the highest level of consolidation, while country aggregates may also include large subsidiaries.

Original Story: EUReporter | EUReporter Correspondent
Photo:FreeImages.com/Szymon Szymon
Edition:Prime Yield