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“Market Watch NPL – Italian Scenario”: Italy forge of NPLs, 104 billion euro of deteriorated assets will be sold by 2017. Average prices between 11% (consumer) and 33% (secured).

The volume of transactions exceeded the growth of new non-performing loans in the first quarter of 2017.
Growth in volume of non-performing corporate loans, especially in the construction industry.

Milan, July 17, 2017 – With over 33 billion euro of non-performing loans sold in the first five and a half months of 2017 – and with the closure of the FINO project, which saw the sale of € 17.7 billion euros of mixed non-perfroming loans from Unicredit to PIMCO and Fortress – 2017 will go on to record as the year of the “explosion of NPL transactions”. According to Banca IFIS estimates, contained in the exclusive report “Market Watch NPL – The Italian Scenario”, around 71 billion euro of additional non-performing loans will be sold by 2017, reaching 104 billion worth of distressed assets exchanged in the Italian market. An amount that makes 2015 and 2016 NPLs volumes seem reductive (respectively 19.1 billion euro in 2015 and 17.3 billion euro in 2016).

A scenario in which regulatory variables will have to be considered, as they will model the future NPL market. In particular, the ECB’s guidelines will positively affect both the transfer of credits and management strategies of the assets, with the aim of identifying the right mix for each portfolio.

The growth in the securitization of non-performing assets reaches a new peak in the first part of 2017, confirming a trend that continues from 2012: 72.4 billion euro of NPLs were secured in the first quarter of 2017, with an increase of 134% in 5 years.

The average prices of secured portfolios (guaranteed by other assets or real estate) show a drastic fall after the surge in the end of 2016. In the second quarter of 2017, the price level for these assets fell to 33%, as a result of an increase of the offer in this market. If the prices of secured assets fall, then those of consumer portfolios go up. The average price is around 11% due to an increase in demand and higher quality of credit (and their heritage of information).

To cope with such a sizeable NPL amount, international players continue to acquire servicing platforms to increase competitiveness and profitability. In 2017 there were four such operations: Bain Capital acquired Heta Asset Resolution; Varde acquired 33% of Guber; KKR acquired Sistemua; Lindorff acquired Gextra.

Market Watch also noted that:

  • – In 2017, domestic buyers began to show strong interest in Italian non-performing loans compared to previous years;
  • – There are 32.4 billion euro worth of NPLs to be closed soon, on a total pipeline of 70.9 billion;
  • – GDP growth and fall in bankruptcies have led to a progressive stabilization of difficult loans;
  • – NPLs show a drastic reduction due to significant write-downs.

Further details, charts and estimates are provided in the full and free version of the Market Watch NPL – The Italian Scenario, which is a quarterly report.