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European NPLs reach peak in 2018 with €205bn in gross book value

The European non-performing loan (NPL) market reached a new peak in 2018 with disposals totalling €205.2bn (£184.2bn) in gross book value (GBV), according to a report produced by Debtwire ABS.

Debtwire NPL Database tracked 142 transactions. The last quarter saw a particularly intense pace of activity, given that at the end of the third quarter of 2018, closed deals totalled €125bn.


The most active country was Italy, which produced half of the total volume of NPL sales. In 2018, Debtwire identified 64 closed NPL sales with a gross book value of €103.6bn, almost half of which were via securitisations within the government’s Garanzia sulla Cartolarizzazione delle Sofferenze (GACS) scheme, which runs only until 6 March 2019.


Sales have started to slow down in Spain, the report found, as the large Spanish banks near the end of their balance sheet clean-ups. However, €43.2bn was completed in 2018 across 27 deals and most of these have involved two buyers, Cerberus Capital Management and Lone Star Funds.


Material activity is starting to take place in other Southern European countries, still the ones with the highest NPL ratios, and market participants expect to see more in 2019. In 2018, Greek banks closed eight sales for a total volume of €13.9bn. Eurobank and National Bank of Greece have focused on large unsecured deals and are preparing secured disposals for circa €2bn and €1bn each. Portuguese banks closed 16 NPL and real estate owned (REO) deals for a total volume of €8bn and Cyprus saw two deals for €2.9bn.


In Ireland, there were eight deals for €14.3bn, while in the United Kingdom the bad bank UK Asset Resolution (UKAR) dominated the loan disposal market with £5.8bn of sales out of a total £6.5bn. Germany has also seen disposal of NPLs connected with troubled local banks. HSH Nordbank’s €6.3bn portfolio, sold together with the bank to Cerberus, made up most of the €7.7bn volume in the country.


“The NPL market has reached a peak that will not be topped in 2019. This is especially the case in Italy, where the GACS effect will slow down, with most large banks having already taken advantage of the program and now needing to focus on unlikely to pay (UTP) portfolios. Still, with European regulators pushing for banks to dispose of their bad loans quickly, activity will remain consistently intense across the continent,” said Alessia Pirolo, Head of NPL Coverage, Debtwire.

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