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Only last year it was the new frontier, but 2019 will see Greece as the main player in the European loan portfolio market. For the first time, at the end of 1Q19 there was a higher volume of ongoing sales in Greece than in any other country, according to the Debtwire European NPLs 1Q19 report.
Data came from Debtwire NPL Database which at the end of the quarter was tracking in Greece 12 deals with a total volume of EUR 25.1bn, or 32.5% of the total volume of EUR 77.8bn in 44 deals across Europe. Italy, which last year had EUR 103.bn of closed transactions, half of the European total, had 12 ongoing deals at quarter end, for a volume of EUR 21bn.
With 22 deals closed with a total volume of EUR 21.4bn, the European loan portfolio market has performed better than expected in the first quarter of the year, traditionally the slowest.
The largest sales closed so far consist of performing loans connected with non-core business disposals that some banks have been focusing on for a while. That’s the case with DVB Bank’s sale of its aviation finance unit with a EUR 5.6bn loan portfolio to MUFG Bank, part of a large disposal strategy of the regional German bank’s transportation finance units. In the UK, UK Asset Resolution (UKAR) continued the winddown of its portfolio, which has dominated the market for performing loans in the past few years. It sold a GBP 4.9bn portfolio to Citi, with financing from Pimco.
Before this new sale its remaining portfolio was GBP 13.6bn for a total reduction of GBP 102.2bn (88%) since the formation of UKAR in 2010. Ireland is giving another push on its residential NPLs, with AIB Group having closed a EUR 1bn sale to Cerberus Capital Management. Rabobank is also in the final phases of a EUR 3.5bn agricultural portfolio sale. Ireland and Spain were among the most active markets in the immediate aftermath of the crisis and market participants expect an increasing volume of secondary deals (see pages 29 and 38).
In Spain, even some of the NPL servicers and property management platforms sold by the banks in the early 2010s are now changing hands again. The M&A market is consistently hot in Southern Europe, as shown by an analysis of data from Mergermarket. In 2018, European banks’ ratio of NPLs to total loans continued to decrease and reached 3.2%, from 3.4% in 3Q18, or a total volume of EUR 658bn from EUR 714.3bn, according to the European Banking Authority’ s Risk Dashboard, published in March 2019. Despite the progress, NPL ratios remain particularly high in Greece and Cyprus, and are still far from the EU’s target of 5% in Portugal and Italy.