Summary of comments made
Intralinks Webinar: An update on the South European NPL market
24 September 2020, 16:00 CET
France
  • Market dominated by a handful of local and international Investors that also service their own portfolios
  • Since March 2020, France now has the biggest stock of NPLs in Europe
  • The big international funds have not had an opportunity to establish themselves due to high barriers to market-entry and small ticket sizes. But now this is starting to change. There is growing appetite to learn about the market, create a track-record of experience and form partnerships - just such a partnership was seen in 2020 between a local player and a European NPL Fund.
  • There is some movement in the French NPL market, but still a long way off becoming anything like the markets of Italy, Spain, etc.
  • It is expected that 2021 will be a dynamic year for the French NPL market. This will include larger disposals, new deleveraging proposals, large volume portfolios coming to market and new segments such as UtPs, sub-performing and performing loans.
  • A strong multi-billion-euro pipeline is expected however, individual deals will stay under 2bn.
  • Will also see more complex deal structures such as Securitization and more external financing.
  • Because of measures such as loan moratoria put in place by the government, it is impossible to get a clear idea of when trades will really start. Until these expire, we will not get a good idea of how much deleveraging is required.
  • There is room for new entrants in the French market. The expected volume of trade will require new Investors and new Servicers to enter.
Portugal
  • Still too early to say what the impact of Covid will be on the NPL market in 2021. It is very difficult at this time to estimate the impact of the many government initiatives such as payment moratoria, suspensions on foreclosures – these all introduce a high level of uncertainty in the market. Payment moratoria in Portugal have just been extended by the government to September 2021. However, it is clear Portugal will experience a sharp increase in NPLs through 2021.
  • It is not expected that a centrally-managed Bad Bank will be created in Portugal in the foreseeable future.
  • It is expected we will once again see more granular, liquid asset classes coming to market as a result of Covid. These will be disposed of using traditional tools and technologies, without the need for new deal structures such as securitizations.
  • Can expect to see some M&A activity amongst Servicers in Portugal. Some smaller Servicers will struggle going forward and therefore, Investors are likely to rely on the bigger, more established players. Investors also like to work with Servicers that are present in multiple countries thereby gaining access to better know-how and tools.
  • Servicers are expanding into new areas of expertise and re-inventing themselves as the market evolves. New services include complex Real Estate and Corporate Restructuring.
Spain
  • There is an extremely sophisticated group of Servicers, Bankers, Investors, Advisors in Spain
  • The role of Sell-side Advisors post-Covid will be critical – the quicker Buyers can be put at ease concerning pricing and servicing expectations, the quicker deals will happen.
  • Spain has been very badly affected by Covid: will this damage the appetite of Investors when markets normalise? – pitching to Investors is currently very hard and will continue to be hard for some time, however the Servicing and Advisory market is sophisticated and ultimately, deals will re-commence at the previous base level
  • Right now, in 2020 there are 15-20 portfolio deals happening in Spain. Investors are hesitant to buy Residential or Consumer portfolios. 54% of financing risk is in families, 46% in SMEs, but default rates are highest amongst SMEs – focus will therefore continue to be on SME portfolios going into 2021.
  • In Greece also, SMEs are being hit hardest. A new wave of SME deals are expected in Q4 of 2020/Q1 of 2021
  • As the sector begins to see how government moratoria and other initiatives stabilize, then we will start to see more granular portfolios coming to market.
Italy
  • NPLs in Italy were reduced by 25% in the last few years from 200bn to 70 bn and in UtPs, from 140bn to 60bn. Now very difficult to predict what will happen as a result of the pandemic.
  • Now billions of SME loans in moratoria, many of these will of course become UtPs or NPLs – it is estimated that 3-5% of these loans will default. This new inflow will be managed well by the Servicers that each of the Banks work with. These Servicers are very well positioned to deal with the extra inflows because the current stock in the market is quite low – they have capacity.
  • Gacs Securitization is a powerful deleveraging instrument in Italy, this will expire again in March 2021 and may take some time to be renewed. Credit Funds are a new deals instrument in Italy mainly for UtPs.


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