21 March, Milano Finanza
“The impact of Addendum introduced by the ECB Surveillance Authority on bad loans management will be minimal, but it would be ideal aligning the provision times with those of the Italian judiciary system, which are very long”. This is the opinion of Riccardo Serrini, Prelios General Director, one of the leading Italian asset managers focusing on real estate investment funds and banks’ bad loans. Serrini believes that 2018 will be very interesting from an NPL disposal point of view. “We expect transfers for over 50 billion of nominal value, mainly for secured loans”, he said.
What would be the effects of the addendum on the banks’ strategies?
The addendum matches the market expectations. It’s focused on new NPLs and not on the stock, it would have been a too heavy impact on banks otherwise. Instead, while the impact for banks will be marginal. In any case, it would be ideal aligning the provision modalities and the times to those of the Italian judiciary system. The reaction times of the Italian banks in the last quarters make assume significant reductions of the Npe ratio (the impact of bad loans on total credits).
Are the Addendum from the ECB and the proposal of the EU Commission compatible?
The interventions are based on a shared approach. Both are restrictive towards the current situation and they make assume even stricter criteria for the issuance of credit.
What are your previsions regarding the bad loans disposal process?
2017 was characterised by big volumes but it was focused on unsecured portfolios. Whereas in 2018 the growth is focusing on secured portfolios, namely loans guaranteed by real estate. We expect transfer volumes for over 50 billion in terms of gross book value, mainly secured, hence with a bigger impact on banks; financial statements and ratio.
What do you think about the State guarantee on securitisations (gacs)?
Gacs are the most effective instrument for banks to dispose of NPLs. The weighted average cost of capital for this type of operations is approximately 3.5% and it’s about one-third of the returns expected by opportunistic investors in this sector. This allows having a higher price compared to the direct sale.
Is the new Ifrs 9 accounting standard an opportunity for banks?
The first time adoption of Ifrs 9 combined with Gacs is a unique opportunity for banks to get rid of bad loans. Another very effective instrument is the transfer of NPL platforms through long-term contracts since this makes possible to generate unexpressed value from the various divisions of the bank.
Which dossier is Prelios currently evaluating?
We’re working on a series of mandates from listed and not listed banks, considering the expiring of Gacs on 6th September. Moreover, we’re working on UTPs (unlikely-to-pay), especially those guaranteed by real estate. We believe this sector has a better competitive advantage since the effectiveness of management is strictly connected to expertise and specific resources dedicated to the development of real estate projects. In this field, we have a consolidate track record, as demonstrated by the recent assignment of the Mipim Award to Fico Eataly World in Bologna, which we have developed through Prelios Sgr with the fund Parchi Agroalimentari Italiani.
Source: Milano Finanza
Translator: Cristina Ambrosi