The new edition of the NPL report edit by Banca IFIS estimates that in 2018
about 57 billion euro worth of NPLs will be sold, of which 26 billion euro already ongoing.
Milan, 17th January 2018 – After years of continuous spotlight on bank NPLs, which banks are now removing from their balance sheet in the last quarters (72 billion euro of NPLs sold in 2017, based on the Market Watch NPL’s data), today the elephant in the room is the UTP. Acronym for “Unlikely To Pay”, it is the result of a bank loan to a debtor who, for one reason or another, could be finding it difficult to eventually meet his commitment to repay.
But how much do UTPs weights in the Italian bad loans market? In September 2017, total non-performing exposures (NPE) in banks’ balance sheets amounted to 278 billion euros gross of adjustments. Of these, 62% were “gross bad debts” (173 billion) and 36% were “gross UTPs” (99 billion), that is, before taking into account the “adjustments” that the banks had already made. To go from “gross” to “net” it is necessary to know the “coverage rate”. Here it is: for bad loans, it is 61,9%, therefore “net non-performing loans” equal to 66 billion. For UTPs, the coverage ratio is 33,7%, therefore “net UTP” curiously amount to 66 billion (keeping in mind that a part of loans classified as UTPs inevitably deteriorates and ends up in bad loans, while another part, if properly managed, returns to “good” loans, that is: “performing”).
«Many suppose that a lively “market” for the sale of UTPs is possible, but for us it is not a realistic hypothesis – said Giovanni Bossi, CEO of Banca IFIS – because in order to start it, what needs to be put in place is not an efficient recovery machine, as for bad loans; but rather, a credit machine, i.e. a “bank”, ready and capable, experienced and reactive, managed by people who know how to work with credit, and not collection».
Beyond UTP, the data of the Market Watch NPL – January 2018 edition highlights that:
The “Market Watch NPL – The Italian Scenario” (January 2018 edition) is available for download here.
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