European NPLs reach peak year in 2018 with EUR 205bn in GBV

Italy produces half of total volume of NPL sales whilst sales slow in Spain. 

The European non-performing loan (NPL) market reached a new peak in 2018 with disposals totalling EUR 205.2bn in gross book value (GBV), according to the new European NPL FY 2018 report, published by Debtwire ABS.

Debtwire NPL Database tracked 142 transactions. The last quarter saw a particularly intense pace of activity, given that at the end of 3Q18, closed deals totalled EUR125bn.

The most active country by far was Italy, which produced half of the total volume of NPL sales. In 2018, Debtwire identified 64 closed NPL sales with a gross book value of EUR 103.6bn, almost half of which were via securitisations within the government’s Garanzia sulla Cartolarizzazione delle Sofferenze (GACS) scheme, which runs only until 6 March 2019.

Sales have started to slow down in Spain as the large Spanish banks near the end of their balance sheet clean-ups. However, a massive EUR 43.2bn was completed in 2018 across 27 deals and most of these have involved two jumbo buyers, Cerberus Capital Management and Lone Star Funds.

Material activity is starting to take place in other Southern European countries, still the ones with the highest NPL ratios, and market participants expect to see more in 2019. In 2018, Greek banks closed eight sales for a total volume of EUR 13.9bn, Portuguese banks closed 16 NPL and REO deals for a total volume of EUR 8bn and Cyprus saw two deals for EUR 2.9 bn.

In Ireland, there were eight deals for EUR 14.3bn, while in the United Kingdom the bad bank UKAR dominated the loan disposal market with GBP 5.8bn of sales out of a total GBP 6.5bn. Germany has also seen disposal of NPLs connected with troubled local banks. HSH Nordbank’s EUR 6.3bn portfolio, sold together with the bank to Cerberus, made up most of the EUR 7.7bn volume in the country.

"The NPL market has reached a peak that will not be topped in 2019. This is especially the case in Italy, where the GACS effect will slow down, with most large banks having already taken advantage of the program and now needing to focus on unlikely to pay (UTP) portfolios. Still, with European regulators pushing for banks to dispose of their bad loans quickly, activity will remain consistently intense across the continent,” said Alessia Pirolo, Head of NPL Coverage, Debtwire.

Related video:

What are the threats and key market drivers of the Italian economy? Chief of Staff of the Italian Minister of Economy and Finance, Fabrizio Pagani, delivers his views at the Unquote Italian Private Equity Forum 2017.


 



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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.

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