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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.

Activity is driven by Italian and Spanish markets, now representing over two thirds of the European market, while the annual volume of traded NPLs in Portugal and the Aegean have more than doubled since 2017.

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.

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.
 

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.

Previous publications

Read past editions of our deleveraging reports and other NPL publications:

2019 Deleveraging Europe: focus on France, October 2019 
2018-2019 Deleveraging Asia, October 2019
2019 CEE NPL study, 2019
2018 Q3 Deleveraging Europe, November 2018
2018 Deleveraging Europe: Focus on France, December 2018
2017-2018 Global deleveraging report, April 2018
2017-2018 Deleveraging Asia, April 2018
2017-2018 CEE NPL study, January 2018
2017 H1 Deleveraging Europe, July 2017
2016-2017 Deleveraging Europe, February 2017
2016-2017 CEE NPL study, January 2017
2016 H1 Deleveraging Europe, August 2016
2015-2016 Deleveraging Europe, February 2016
2015 CEE NPL study, November 2015
2015 H1 Deleveraging Europe, August 2015
2014-2015 Italian NPL outlook, 2014
2014 CEE NPL study, 2014
2013 CEE NPL study, 2013
2012 CEE NPL study, 2012

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