NPL study

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Benchmark Study on Non-performing Bank Loans

CEE NPL markets on the peak? Strong dynamics with shifting focus

As a leading advisor in the CE market for non-performing loans, Deloitte has a long track record of conducting deleveraging and bank loan portfolio transactions gaining considerable insight to the developments of loan portfolio markets, as well as the evolution of key NPL metrics in Central and Eastern European countries.

About the survey

In the 6th edition of our white paper study covering the Baltic region (Estonia, Latvia, Lithuania), Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia, Slovenia, Ukraine, we examine the debt sales markets in Central and Eastern Europe, providing an up to date overview of recent market dynamics along with insights provided by our Portfolio Lead Advisory Services experts.

As UK and Irish debt sales markets mature, activity of NPL markets significantly increased in Central and Eastern Europe and in the Mediterranean regions. Similarly to 2016, the improving macroeconomic conditions as well as the upsurge of real estate markets remained the main catalysts for non-performing loan sales in the CEE region in 2017. Access to cheap funding contributed to investors’ enhanced financing capacity, thus giving an impetus to the demand side. With regards to the supply side, regulators and local authorities in many geographies developed measures to urge financial institutions to dispose distressed as well as non-core assets. Investors who already built their servicing capacity and gained experience in portfolio servicing in the CEE region are likely to be involved in NPL transactions going forward in order to increase their portfolio exploiting advantages arising from economies of scale.

On the other hand, Deloitte expects only a limited number of new investors to enter the CEE region in the forthcoming years due to the decreasing transaction pipeline. In addition, larger packages are offered for sale in the Mediterranean region compared to the portfolios traded in the CEE debt sales markets which are more attractive for many international investors, therefore focus of such investors is expected to shift towards these geographies in the forthcoming years.

PDF, 2.4 MB

Key findings

  • The sale of non-performing assets is still the most common deleveraging option among banking industry players in the CEE region. As UK and Irish debt sales markets mature, the focus of investors turned towards the CEE and Mediterranean regions, giving an impetus to distressed asset transactions.
  • Non-performing loan portfolio disposals picked up in 2016 with just over EUR 7bn face value of completed deals in the CEE region, and enhanced debt sales market activity continued in 2017. The most active CEE markets with the highest volumes of portfolios sold in recent years were RomaniaHungaryCroatia as well as Slovenia.
  • Following the disposal of sizable corporate NPL portfolios, supply of new corporate NPL portfolios to be sold by banks has visibly decreasedrecently in many countries. Although, corporate NPLs are still the most actively traded loan portfolios, some investors turned their interest towards retail mortgages on the back of improving macroeconomic environment and residential real estate markets, notwithstanding some pontential political and reputation risks.
  • While activity in geographies where corporate NPL volumes are still relatively high is expected to rise in 2018, mature markets in terms of corporate NPLs are likely to shift towards mixed and retail mortgage debt sales.
  • Activity of NPL markets in CEE is likely to gradually subside in the forthcoming years and NPL markets of the Mediterranean countries are expected to emerge and attract more significant investor focus. However, loan portfolio markets in the CEE region that have not seen much activity in recent years are likely to emerge in the forthcoming years, potentially Ukraine and Bosnia and Herzegovina.
  • In parallel with the slowdown of a few regional NPL markets, performing loan transactions and banking entity deals are likely to perk up on the back of the ongoing consolidation of the fragmented CEE banking markets.

 

How long will the investors’ focus remain on the CE region and what are the current trends appearing in the loan sale markets?

Explore the latest insights from the Deloitte NPL study (PDF, 2.5 MB)

“All things considered, the current market momentum prevailing in the CEE region gives an opportunity for both NPL sellers and buyers to complete a successful, value maximizing portfolio sale transaction.”

- Balázs Bíró, Head of Portfolio Lead Advisory Services in the CEE region

CEE NPL markets on the peak? Strong dynamics with shifting focus

NPL transaction volumes reached record high in 2017 and 2018 is even more promising

Would you like to more about the loan investment market?

Our Global Leverage report identifies the key trends that affected the European and emerging loan investment markets in 2017, and provides predictions for 2018.

(PDF, English, 5 MB)
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