Header image

Decade ends with lowest NPL levels on European bank balance sheets since 2010

  • From EUR 706bn in 2010, European NPL volumes reached a peak of EUR 1.2trn in 2014 and since then have consistently decreased, to EUR 635bn as at June 2019
  • A total of EUR 38bn changed hands in Italy, well down from the record EUR 103.7bn in 2018
  • Greek banks slightly slowed down the pace of sales, down to EUR 9.8bn in 2019 from EUR 13.4bn in 2018

London, United Kingdom, 13 January 2020: The decade ended with the lowest level of non-performing loans (NPLs) on European bank balance sheets since 2010. After a push from regulators, banks across the continent ramped up their efforts, with a record volume of sales in 2018, according to the new European NPLs - FY19 report, published by Debtwire ABS.

From EUR 706bn in 2010, European NPL volumes reached a peak of EUR 1.2trn in 2014 and since then have consistently decreased, to EUR 635bn as at June 2019. The banks that still have the highest NPL volume are France’s BNP Paribas, and Italy’s UniCredit and Intesa Sanpaolo. The top 10 biggest loan portfolio transactions — excluding transfers to bad banks — were all closed within the last five years. In the past five years there were disposals for EUR 633.8bn across 615 deals, which covers non-core loan and NPL portfolio sales from 2015

European non-core and non-performing loans disposals reached EUR 102.4bn in 2019, half the total in the record year of 2018, when they hit EUR 208.1bn. NPL ratios fell across European banks to an average 3% as of June 2019, according to data from the EBA transparency exercise published at the end of November, the lowest since the standardisation of the NPL definition in 2014, when the average NPL ratio was 6.5%.

With European banks getting a grip on their bad loans, however, the rate of decrease has declined.  The total non-performing exposure (NPE) volume across the European Union was EUR 635bn as of end-1H19, down EUR 111.2bn from EUR 746.2bn a year previously. In the year to end-June 2018, the decrease was EUR 146.8bn, from a total EUR 893bn at end-June 2017.

Italy continues to be the most active market— a total of EUR 38bn changed hands, well down from the record EUR 103.7bn in 2018. Italian NPL securitisation totalled EUR 16.5bn. Notably, the largest transaction of the year was a secondary securitisation. Hoist Finance closed the first-ever Italian investment grade rated securitisation backed by a portfolio comprising only unsecured NPLs, a EUR 5bn portfolio it had previously bought from Italian lenders. There were five deals within the Italian government’s GACS scheme for a GBV of EUR 8.2bn, a huge drop from the 15 deals worth EUR 52.3bn in 2018.

A Greek version of the GACS scheme, the government guarantee scheme Hercules, was approved in December. Waiting for approval of the programme, Greek banks slightly slowed down the pace of sales, which at EUR 9.8bn in 2019 were down from EUR 13.4bn in 2018. Most sales involved secured portfolios.

On the other hand, unsecured NPLs were the majority of those sold in Spain, the second largest market in Europe. Traded Spanish NPLs totalled EUR 16bn, down from EUR 44.9bn in 2018 and from EUR 54.9bn in 2017. In such a mature market, secondary sales are getting traction, notably Blackstone’s sale of a EUR 1bn mortgage portfolio to CarVal.

In the UK, the third largest market for sales, two jumbo performing mortgage sales made up most of the EUR 11.4bn equivalent traded. Bad bank UKAR kept up its consistent activity, with the sale of a GBP 4.9bn portfolio to Citi. Tesco Bank exited the market with the sale of its entire GBP 3.7bn mortgage portfolio to Lloyds Banking Group. Ireland confirmed its focus on residential portfolio sales, which totalled EUR 5.8bn, 60% of the country’s entire traded volume of EUR 9bn in 2019.

The year also saw some notable firsts. In France, BNP Paribas sold the country’s largest secured portfolio so far, the EUR 375m Project Agate, to Hoist Finance. And the largest Ukrainian NPL portfolio to date, USD 416m equivalent in principal and interest, was sold to Financial Company Helios by the Deposit Guarantee Fund of Ukraine.

“Smaller markets are not likely to keep pace with countries such Italy and Spain, but with a still sizeable amount of NPLs remaining on banks’ balance sheets, continued pressure from regulators, and an increasing focus on secondary and non-core transactions, 2020 is set to remain a busy year,” said Alessia Pirolo, Head of NPL Coverage, Debtwire.

Alessia Pirolo Head of NPL Coverage Debtwire

Alessia Pirolo is Head of NPL Coverage at Debtwire ABS. From a previous focus on Southern European Commercial Real Estate, she is now in charge to expand Debtwire's NPL coverage areas around the world. Before joining Debtwire, she covered U.S. and European commercial real estate for The Wall Street Journal, and the Commercial Observer. She holds a master’s degree from the Columbia University Graduate School of Journalism.

Alessia Pirolo Head of NPL Coverage Debtwire

Alessia Pirolo is Head of NPL Coverage at Debtwire ABS. From a previous focus on Southern European Commercial Real Estate, she is now in charge to expand Debtwire's NPL coverage areas around the world. Before joining Debtwire, she covered U.S. and European commercial real estate for The Wall Street Journal, and the Commercial Observer. She holds a master’s degree from the Columbia University Graduate School of Journalism.

Debtwire Product Trial

Get these unique insights and more with Debtwire

Debtwire gives fixed income professionals an edge in leveraged finance, distressed debt and direct lending.

Request Trial

Debtwire Events
Debtwire transformed the market and quickly became the leading provider of expert news, data and analysis on global leveraged credit. With global breadth and local depth, our end-to-end coverage goes behind the scenes from primary issuance to the first sign of stress through restructuring and beyond. Subscribers trust Debtwire – the pioneer in the industry – for comprehensive coverage across geographies, companies and asset classes. Backed by Debtwire’s team of experts and award-winning content, our events offer attendees an unrivaled perspective.