NPL study 2019

Article

Diverse CEE NPL landscape

This 8th edition of our benchmark CE NPL study highlights that the downward trend of non-performing assets continued across almost all countries in the CEE region. The combination of stable macroeconomic environment, the supervisory and political attention as well as banks’ commitment to tackle non-performing assets has been the main catalyst for shrinking NPL stocks.

Countries in the region saw a vibrant NPL market activity in 2018 and 2019, fueled by strong investor appetite mainly among investors who have already built their servicing capacity in the region. The gradual tackling of legacy non-performing loans in tandem with the reduced inflow of new NPLs and investors’ interest in the prospect of higher yields contributed to the decrease of non-performing assets.


Following a subdued year in 2017 in terms of the volume of loan portfolios traded, 2018 saw portfolio sales worth almost EUR 6bn. Poland, Hungary and Romania each contributed to the volume of completed transactions with above EUR 1bn in 2018. Investors’ lower recovery expectations as well as cheap funding in the wake of benign macroeconomic environment had a positive impact on the pricing of the portfolios. This was also stimulated by the increasing rivalry on the demand side.

Key themes highlighted in this study include:

  • Portfolio disposals continue to play a significant role in banks’ deleveraging activity in the CEE region evidenced by the material volume of NPLs traded in 2018 (EUR 5.9bn).
  • The NPL ratios have been gradually trending back to single-digit figures or even converging the pre-crisis level. As of end-2018, only three countries reported total NPL ratios above the 10% threshold, namely Albania (11.8%), Croatia (12.1%), and Ukraine (54.0%).
  • Markets that have dealt with most of their NPLs are expected to start tackling their non-core assets and are likely to sell more performing and subperforming loans. This is likely to materialise in the sale of corporate single-tickets.
  • Secondary market transactions are expected to accelerate mainly driven by the consolidation of smaller players on the distressed debt collection and servicing market.
  • In the short term, asset quality reviews can promote further transactions in Bulgaria and Croatia.
  • Sell-side activity is expected to increase in certain countries driven by deposit insurance funds which is already evidenced in completed and ongoing transactions.
  • In the light of expected increase in interest rates and economic slowdown banks need to closely monitor the asset quality and possible deterioration of default rates in order to prevent future build-up of distressed assets.
Key themes highlighted in this study include:

· Portfolio disposals continue to play a significant role in banks’ deleveraging activity in the CEE region evidenced by the material volume of NPLs traded in 2018 (EUR 5.9bn).

· The NPL ratios have been gradually trending back to single-digit figures or even converging the pre-crisis level. As of end-2018, only three countries reported total NPL ratios above the 10% threshold, namely Albania (11.8%), Croatia (12.1%), and Ukraine (54.0%).

· Markets that have dealt with most of their NPLs are expected to start tackling their non-core assets and are likely to sell more performing and subperforming loans. This is likely to materialise in the sale of corporate single-tickets.

· Secondary market transactions are expected to accelerate mainly driven by the consolidation of smaller players on the distressed debt collection and servicing market.

· In the short term, asset quality reviews can promote further transactions in Bulgaria and Croatia.

· Sell-side activity is expected to increase in certain countries driven by deposit insurance funds which is already evidenced in completed and ongoing transactions.

· In the light of expected increase in interest rates and economic slowdown banks need to closely monitor the asset quality and possible deterioration of default rates in order to prevent future build-up of distressed assets.

Download previous editions