27 January, Milano Finanza
Technically they’re called single name transfers: the bank sells single credit of significant amounts rather than big portfolios with various positions. This is the approach adopted by Carige to deal with the stock of unlikely-to-pay (UTP). According to Milano Finanza, after having worked on the NPL stock, the bank led by Paolo Fiorentino might put on the market in the next months about 20 corporate credits with nominal values between 5 and 30 million euro. The credits are mostly connected to the maritime and real estate sectors, even though the biggest positions should not be included in the action. This is the case of a credit for about 500 million towards the group Messina that will be fragmented and dealt with using a mixed strategy of transfer and management since the various credit lines are referred to single vessels. Generally, the bank will deal with international investors with specific experience in the sector.
While single name operations seem to be the way to deal with the UTP stock, securitisations are a less likely instrument in this case (even if feasible in theory). In fact, in this case, the bank should identify a granular portfolio and appoint for its management a specialised servicer. The management of UTPs is very different from that of NPLs and the process to obtain value from the stock requires e level of expertise that is not easy to find on the Italian market.
Another interesting aspect Carige is working on is the asset impact of the transfers. Even if the quality of the portfolios may vary, a conservative approach suggests keeping a bid/ask spread similar to that of the non-performing loans. However, we must add that Carige, like the other banks that transfer credits, can benefit from the advantages of the first time adoption of the new accounting principle Ifrs 9. In fact, banks can amortise the impact on the assets and therefore reduce the effect of the transfers.
While defining the strategy to adopt with UTPs, the other operations of the bank from Genoa are continuing. On one side, the bank is still working on the strategic partnership for its information technology division. At the end of the past year, Carige started a negotiation with Ibm which might continue in the next weeks. Concerning transfers, there is great interest in the properties in Rome and in London that the bank put for sale in the last summer pursuant to its strengthening plan. Due to the reduced urgency to strengthen the capital, the transfers will be distributed through the time trying to obtain the best price.
Source: Milano Finanza
Translator: Cristina Ambrosi