European loan portfolio markets take a breather as the majority of banks report NPL ratios below 3%
This ninth edition of our benchmark Deleveraging Europe report highlights increasing diversification in asset classes and loan types traded in portfolio sales, as the European banking sector reduces its overall NPL ratio to 3%, with three quarters of banks reporting an NPL ratio below this average.
The volume of European loan portfolio sales has been steadily increasing over recent years, reaching a record €200bn traded in 2018. 2019 has been off to a somewhat quieter start as investors and banks digest last year’s deals, and the European banking sector reaches an average NPL ratio of 3% for the first time since the global financial crisis.
Key themes highlighted in this report include
- Italy and Spain continue to drive European deal volumes, having each seen over €50bn traded in both 2017 and 2018.
- Portuguese and Aegean banks are still saddled with Europe’s highest NPL ratios despite deal volumes in the countries more than doubling since 2017.
- Having broadly brought their NPLs under control, European banks are shifting focus to their stocks of non-core and sub-performing assets (UTPs) and foreclosed properties (REOs).
- European banks continue reducing exposure to ship financing, as the ‘synchronised slowdown’ in global trade hits margins and profitability in the sector.
- Demand for third-party loan servicing expertise is increasing, with regulatory developments fostering professionalism and consolidation in an increasingly international market.
The following countries examined in the study
- United Kingdom
The market for loan portfolios is now shifting to new asset classes and loan types, including the “sub-performing” unlikely-to-pay (UTP) loans in Italy, real estate owned (REO) assets in Iberia, as well as ship financing. Investors are also increasingly looking farther afield, as highlighted in our second Deleveraging Asia report which received significant interest and coverage from Debtwire, Bloomberg, and global financial media.