Intralinks Webinar: An update on the North European NPL market
3 December 2020, 16:00 CET
Summary of discussions
Watch the full session
General
  • Banks are well capitalised and are in a better position than after the crisis in 2008.
  • The Banking sector is not under pressure now but it will come. Problems will start mid-2021/2022.
  • Lots of outsourcing may happen. Opportunities for specialized Asset Managers in SME, commercial and distressed debt in general
  • A whole new asset class is emerging in the UK with something like 80% of Bounce Back Loan (BBLs) expected to default. SME Retail and Unsecured to be a problem.
  • UK/DE: housing market is performing well, profits, prices and volumes rising
  • UK facing a ‘triple trouble’ situation at the moment – pandemic, Brexit & Christmas. Significant NPLs are expected
  • In the UK, NPE’s will be expensive because of calendar provisioning. This will force banks to sell
  • Government intervention came very early during this crisis, moratoria and other actions bending and changing the market and causing a complete stop in sales
  • AT – low NPL ratios (under 2,5 %), higher inflow of NPL expected in 2021 and 2022
  • Germany, Austria – prefer restructuring over sales, expecting high work-out activities in the next two years and then potentially higher sales activity
  • Many new outsourcing business opportunities expected but possible further consolidation activity (Servicers, DCAs, Investors)
  • Opportunities for specialized Asset Managers in SME, commercial and distressed debt in general
  • There is significant liquidity in the market, many investors looking for opportunities, just waiting for the situation to clear up
  • New asset classes in UK: SME & SME unsecured. BBLs to experience significant defaults
  • Margins of the Banks are very low, Asset Managers are struggling to reach their business plan targets
Commercial Real Estate
  • Potential boom in commercial RE transactions, due to the pandemic many office buildings are of no use anymore
  • The price level has been very high in the past 5 years, very low margins on the bank side
  • Many commercial RE assets are on a lease contract – can it be restructured? who will do the workout?
  • There might be a lack of asset management professionals in this field
  • There can be a full stop in origination in the hotel RE field observed, no prolonging for existing clients – This will definitely hit the market in the next years, hotels are being changed to residential RE
  • Banks have been very conservative towards commercial RE financing, therefor the risk moved to the private funds (pension funds, private equity) which are now much more exposed to commercial RE risks
Loan Sales
  • An increase in sales activity can be expected in the whole of CEE and Germany, big portfolios are coming
  • An important question is what NPL levels will be accepted by regulators
  • Keeping NPLs is becoming more and more expensive – it has to be covered with either loan loss provision or equity – there is therefore pressure to sell
EU Bad Banks
  • There are many unanswered questions and details are lacking in order to be able to express an opinion
  • Who will fund such an AMC? Who will take the loss? Will banks be forced to transfer their portfolios? How will Servicing be outsourced?

Note:
AT – Austria, DE – Germany, and so on


SmithNovak © | Contact us | Privacy Policy