The NPL market is volatile and very complex: some maxi operations that were announced last year are taking place in 2017. Even though the transferred value is growing compared to 2016, the real number of portfolios available able to satisfy the requirements of the big crowd of investors and buyers is rather slim. In fact, some important buyers haven’t managed to get any relevant portfolio.
This is the situation emerging from the NPL Market National Observatory by Credit Village which, from the 1st January to 31st August 2017 has registered 114 transactions of bad loans portfolios, almost the double compared to the 62 registered in 2016. The Credit Village Observatory has been registering since January 2016 all the transactions on the national NPL market. According to the last Monthly Track Record, the gross value of the transactions carried out between January and August 2017 is set at 31.2 billion euro, with a real value assessed for 21.2 billion.
A difference of 10 billion euro which pictures the gap between the total value (or announced) of an operation and the value of the portfolio actually transferred. In fact, in several securitisations, the seller has maintained significant participations, direct or indirect, in the vehicles the portfolios were transferred to.
A good example is the famous FINO operation by Unicredit. On 30th June 2016, the value announced for the portfolio by Unicredit was 17.7 billion euro. At the moment of transferring it, the value has reduced to 1.5 billion due to the amount cashed by the bank through the collection activity. Despite this reduction, we’re still continuing talking about a 17.7 billion euro transfer. However, the real value of the portfolio, now not anymore held by Unicredit, is a little more than 8 billion euro.
Analyzing how the securitisation operation is structured, the Credit Village Observatory highlights how Unicredit actually kept almost half of the 16.2 billion transferred portfolio. In fact, only 50.1% of the securities issued by the ad hoc vehicles (Onif, Fino 1 and Fino 2) are currently held by Fortress and Pimco, the two investors that got the deal. The remaining 49.9% is still with Unicredit that plans to transfer an additional 30% in the second phase of the operation.
Besides, the Track Record of Credit Village shows a new trend in the NPL market: 2017 is characterised by a significant number of “surgical” operations, namely operations concerning single positions, often bad loans deriving from mortgages or corporate debt from small banks. These deals are in most cases closed with one-to-one negotiations and the investors are both small and big operators.
The current year sees the reduction of the NPL stock offered for transfer by the consumer credit companies, which for many years have been the reference point, especially for the unsecured segment. In the first eight months of 2017, the transactions have been little more than one billion euro. This is due to some important divestiture plans of non performing loans that the sector has been carrying out since 2012, to the point of nearly running out of stock, and due to more strict regulations on issuing and managing credit.
The Re-Trade market is also decreasing, despite having been very active in 2016. With barely 1 billion euro of transactions since the beginning of 2017, against the 5 billion for the same period of the previous year, there is little hope to see the consolidation of a market that would be ready to match the needs of those investors that cannot get portfolios from the primary source.
Translator: Cristina Ambrosi