NPL report: on 414 banks only 38 failed

05 February, Il Sole 24 Ore

Making a virtue of necessity. Italian banks have not solved their issue with NPL stocks, but they’re dealing with that. To the point that, according to the test implemented by the Mediobanca Research centre, of 414 surveyed banks, only 38 exceeded the risk thresholds in 2016. Carige is still on the blacklist even after the capital increase, despite having improved its situation. The bailouts and acquisitions must have halved the number of rejected banks in 2017.

The test

There are four parameters to detect risk. The first is the Texas ratio that links the non-performing loans with the net tangible assets. If the ratio is over 100, it means that the potential losses on the bad loans might be capable to impact all the assets. Mediobanca estimated that there are 113 banks in this situation, 27.3% of the total, equal to 31.8% of the system if we consider the assets on the books. The second parameter is the cost/income ratio. There are 91 banks weighted down by costs over 90% of the earnings, hence they’re not very efficient: these are the 22% of the total, equal to 29.2% of the total aggregated assets. The third parameter is the non-performing loans percentage higher than 20% of the credits towards clients (NPL ratio). The figures are higher here: there are 173 banks with a high ratio, equal to 41.8% of the total, and 28.9% of the total assets on the books. This is the sign that the issue concerns mostly smaller banks. Finally, there is the ratio between the net bad loans and the Cet1 (the surveillance equity parameter): 118 banks, 28.5% of the total and 34.7% of the total assets, exceed 100%.

The report

In conclusion, 191 banks, 46.1% of the total, have fully passed the test, 87 (21%) have to review one parameter, 35 (8.5%) have to review two, 63 (15.2%) have to review three, and 38 banks have failed in all the four parameters.

The blacklisted

The 38 banks that have been blacklisted show on average a Texas ratio equal to 128.3%, a cost/income ratio of 104.2%, an NPL ratio of 28% and the ratio between net bad loans and cet1 is equal to 170.2%. It’s not by chance that on the blacklist there are banks like Carige, that had to undergo an emergency capitalisation at the end of 2017, along with Veneto Banca and Popolare di Vicenza, the two banks that ended up in an administrative compulsory liquidation and they were bailed out by Intesa Sanpaolo last year. Whereas Banca Etruria, Banca delle Marche e CariChieti are still on the blacklist despite the bailout. CariFerrara reported good results only in one parameter, namely the cost/income ratio equal to 55%, but the Cet1 was still negative at the end of 2016. On the other hand, more than half of the bank was acquired by Hypo Alpe Adria which closed all the branches except for the central office.

The consequences of bad debts

Having their credits under control makes the difference also for what concerns revenue. In fact, the 38 black-listed banks have a bad debts provision rate equal to 57.5% of the income, registering a negative Roe (return on equity) of 15.5%. On the contrary, the 191 banks that passed the test reported a positive Roe equal to 3%, and a Texas ratio of 54.3%, a cost/income of 75.8%, an NPL ratio of 11.9%, an impact of the impaired loans on the core tier equal to 42.1%, and a bad debts provision equal to 18.4% of the earnings.

The listed companies

The black ship of the listed companies is Carige which, according to the figures at the end of September, reached all the danger levels. After the interventions at the end of 2017 (a recapitalization for half a billion and the transfer of gross NPL for 1.2 billion), the estimated Texas ratio fell from 132.4% to 110%, the NPL ratio went from 32.3% to less than 28%. Six banks over 11 show a Texas ratio over 100%. Besides Carige, the highest level was reported by Creval (127.2%). It’s followed by Bpm (116.6%), Mps (111.1%), Bper (104.9%) e Ubi, slightly over 100.7%. Of the other five banks, Credem has the least worrying ratio with 49.9%, Unicredit (which has adopted a massive strategy of NPL disposal) has a Texas ratio of 61.5%, Intesa has 74%, Popolare di Sondrio has 90.6%, and Banco di Desio has 99.5%. The same six banks with a Texas ratio over 100% have net bad loans higher than the Cet1. The situation is the same, with the only exception of Ubi which is fairly balanced, if we consider the gross unlikely to pay over the total of the credits towards clients. In this case, the worst NPL ratio was reported by Mps (37.2%), while Credem registered the best performance (5.8%). The cost/income ratio is good for almost all the listed companies, with the exception of Carige (106.1%) and Mps (93.7%).

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Rev, only two left competing for the one-billion NPL portfolio

18 October, Il Sole 24 Ore

The procedure: awaiting the assembly on 24th October, the fair valuation is fundamental. Most of the portfolio is secured.

The negotiation for the transfer of approximately one billion non-performing loans by Rev Gestione Crediti is at a crucial point. The bad bank received 10.3 billion bad loans coming from Banca Etruria, Carichieti, Cariferrara, and Banca Marche. According to the rumours, yesterday the team led by the Ceo Salvatore Immordino and KPMG in the role of advisor opened the offers submitted by the three bidders, the American funds Bain, Fortress, and Cerberus, for the Project Rossini. The project was launched by Rev and it sees the transfer of one billion bad loans, mostly guaranteed by real estate and belonging for the most part to the former Banca Marche.

Moreover, the Board of Directors gathering on 24th October might already have a fair valuation by a consultant on the offers received. In any case, according to financial sources, only two offers would be analysed of the three arrived yesterday morning: those of Cerberus and Bain, judged economically superior, even if with different characteristics, compared to that of Fortress. It will take a couple of days to know the winner. This will be a fundamental step for Rev, which is about to sell the large-sized secured portfolio (guaranteed by real estate). However, the selling price will be determining.

The name of the dossier, Project Rossini (from the famous composer from Marche) has some specific characteristics: 65% of the bad loans belongs to Banca Marche, the remainder comes from Banca Etruria, Carichieti, and Cariferrara. Besides, 40% of the portfolio is secured by residential properties. It’s also interesting to note that 80% of the properties are located in the Centre of Italy, especially in Marche, Abruzzo, Lazio, and Emilia Romagna. The portfolio is composed of residential, industrial, and commercial properties.

The conclusion of the tender for Rev is fundamental to open a new dossier, after having sold during the summer a 300 million bad loans portfolio to the American fund Seer Capital Management. In fact, Rev must be already working on another project related to the launch of a 1.5-2.5 billion euro tranche of a securitisation which will use Gacs, namely government guarantees.

Source: Il Sole 24 Ore (by Carlo Festa)

Translator: Cristina Ambrosi

The Rossini project by Banca Marche is at the final rush: three funds for one billion NPL

15 October, Il Sole 24 Ore

The binding offers for the Rossini project are expected for tomorrow. The project was launched by the Rev, the bad bank that received 10.3 billion bad loans from Banca Etruria, Carichieti, Cariferrara, and Banca Marche.

The operation is managed by Kpmg and it sees the transfer of about one billion NPL. According to the rumours, three players have been admitted to the final round of the tender. Among the names short-listed to present the offer, there are the American Bain, Fortress, and Cerberus.

The name of the project launched by the Rev, Rossini (from the famous composer from Marche), has a clear meaning: 65% of the bad loans come from the former Banca Marche. The rest is from Etruria, Carichieti, and Cariferrara. Moreover, the one billion portfolio is for 40% secured by residential real estate.

The remainder of the NPL portfolio belongs to Etruria, Carichieti e Cariferrara. Besides, 80% of the properties are located in Central Italy, especially in Marche, Abruzzo, Lazio, and Emilia Romagna. In the portfolio, there are residential, industrial, and commercial properties. We must add that the Rev might be already working on another project. According to the rumours, it might be launching a tranche around 1.5-2.5 billion euro of a securitisation which will involve Gacs, namely government guarantees. For this purpose, a servicer might be chosen.

In this way, the work of the company led Salvatore Immordino continues, with a first direct sales operation concluded in September on an unsecured portfolio. In fact, a 300 million euro bad loans portfolio was sold to the American fund Seer Capital Management. The operation was carried out through Locam spa, a Rome-based servicer specialised in non-performing loans, controlled by Seer Capital since 2013. That portfolio was composed mainly of small credits, unlike the Rossini portfolio, which implies the sales of credits backed by real estate.

In the past few months, Rev has cashed also about 180 million euro through the ordinary management and the sales of some properties put as a guarantee of leasing loans.

 

Source: Il Sole 24 Ore (by Carlo Festa)

Translator: Cristina Ambrosi