Tag: NPL reduction

Italy first for NPLs in Europe with 153 billion

21 March, Milano Finanza

The latest EU report on banking surveillance places Italy first concerning NPL stock (153 billion euro), followed by France (130 billion), Spain (95 billion) and Greece (90 billion). In 2018, the total NPLs in the Eurozone reduced to 628 billion euro. Despite that, the level of impaired loans in the European banking system is still very high compared to the international standards, requiring further efforts to consolidate the results achieved so far and to cover the risk for pre-existing and future NPLs adequately.

Source: Milano Finanza

Translator: Cristina Ambrosi

Mps is speeding up the operations

22 February, Milano Finanza

Mps is ready to launch its first de-risking operation of 2019. According to Milano Finanza, the bank is about to sell two UTP portfolios for a nominal value of approximately 500 million. The first portfolio is expected to be put on the market next week, while the sale of the second one won’t happen before the beginning of March. It might be the biggest operation of this type ever launched so far, as the deal will have approximately the same amount as the one launched last years (Project Alpha2) for 420 million.

So far, Mps has been selling UTPs through single name operations to obtain the best value and to reach the right investors to work in the stock. The strategy is similar to the one adopted by Unicredit, which is selling UTPs through small operations. Now, Mps decided to intensify the activities and to proceed with selling credits in bulk in order to accelerate the de-risking transactions. The sale of a UTP stock for a nominal value of 2 billion is expected by the end of the year. These operations follow the last year’s activities which saw the bank disposing of NPLs worth 29 billion by transferring them (27 billion) and reducing its UTP stock (2.3 billion). By the end of the year, the coverage rate was 53.1% (NPLs were 62.4%), and the cost of credit was 72 basis points.

Concerning the potential buyers of the new portfolio, it’s possible that they will be the same who took part in the recent operations: from the team composed of Aurora Recovery Capital – Gwm and the one consisting in Frontis – Algebris which got the Alpha2 portfolio at the beginning of the year. American groups such as Fortress and Cerberus and the fund Bain Capital Credit might be other participants in the competition.

There are operations in the pipeline also for what concerns the bank’s real estate properties. Mps is about to receive soon the offers for its portfolio amounting approximately to 600 million euro which was put on the market in the past months. Duff & Phelps is the advisor for the operation, which mostly concerns the bank branches that had been closed with the reorganisation process. It’s not to be excluded though that a part of the operation might involve sales & leaseback solutions, as other banks had done in the past few years. The portfolio includes the bank’s offices in Milan in Via Santa Margherita, as well as office buildings in Rome and Florence. Among the potential buyers, there are Blackstone, Starwood, Tristan Capital Partners, Lonestar, Apollo and Cerberus.

Finally, the Mps IT platform is also on the market, although there are no updates yet in this regard.

Source: Milano Finanza

Translator: Cristina Ambrosi

How Intesa Sanpaolo will do business with Intrum

04 December, Start Mag

After having obtained the green light, Intesa Sanpaolo and Intrum have entered the agreement for a strategic partnership concerning bad loans. The deal was signed and announced last 17th April.

The numbers of the Intesa Sanpaolo-Intrum agreement

The agreement implies the construction of a servicing platform 51% held by Intrum and 49% by Intesa Sanpaolo plus the transfer and securitisation of an Intesa NPL portfolio.

The capital gain stated by Intesa Sanpaolo

Once completed, the operation will result in a capital gain of about 400 million euro after taxes in the consolidated profit and loss statement of Intesa Sanpaolo Group for the third quarter of 2018.

The comment of Intesa Ceo Carlo Messina

“Today, we’ve made a crucial step towards the fulfilment of the 2018-2021 business plan, implying the reduction by approximately 11 billion euro – including adjustments – of the NPL stock, without charges for our shareholders”, stated Intesa Sanpaolo Ceo Carlo Messina commenting the operation with Intrum.

The objectives of the operation for Intesa Sanpaolo

He added: “The operation made possible the achievement of half of the target set in the business plan up to the end of 2021. The agreement is consistent with our de-risking strategy, which our group has been pursuing since 2015, especially through Capital Light Bank headed by Giovanni Gilli. Such a strategy has allowed us to reduce the NPL stock for a total of 26 billion euro in three years with no costs for the shareholders. We believe Intrum is the best partner to create together a company which aims at becoming a market leader. We’re sure the company will provide excellent results, thanks to the use of the most advanced NPL management technologies”.

Intrum’s plans for Italy

The Swedish group is increasingly focused on Italy. The servicing company might acquire new management platforms, although this is not its priority, as the company is currently focused on acquiring portfolios. This is what Ceo Mikael Ericson said last September during the NPL conference organised by Banca Ifis. Ericson reminded how the partnership with Intesa Sanpaolo “has been a large transaction for us, and we have now to digest it”. When asked about the new opportunities, he replied: “We’re here to stay. We’ll certainly evaluate new investments. We want to grow in the Italian market. The platform with Intesa is solid and competitive. What matters now is attracting new servicing opportunities and helping clients by acquiring portfolios. Platform acquisition is not our priority, but if that would be necessary to acquire a portfolio, we’ll certainly evaluate the possibility”.

The article by Start Magazine following the announcement by Intesa Sanpaolo

The offer concerns two separate operations. The first one involves the acquisition of the Intesa servicing platform, 51% of which will go to Intrum for 500 million euro. The second is related to NPLs for a total amount of 10.8 billion gross, which will be securitised for a value of 3.1 billion euro, namely 28.7% of their gross value. The value is consistent with the figures reported in the accounts. The operation will generate a capital gain of about 400 million euro after taxes in the consolidated statements of Intesa Sanpaolo.

What will happen

The operation is included in a broader offer from Intrum Justitia concerning a strategic partnership with Intesa Sanpaolo on bad loans. The integration of the platform of the Italian bank and Intrum might lead to the creation of a leading servicer in the Italian NPL market.

What Repubblica commented

As Repubblica wrote: “Having postponed the sale of NPLs and having made Intrum and the Chinese Cefc competing allowed Intesa to obtain 28.7% of the nominal price on average, which is well above the average”. Although the market is improving, “the result is way above the 18% of the four good banks which got rid of NPLs for 10 billion and above the 13% that Unicredit got from the sale of NPLs for 17 billion in 2017”.

How the operation will be structured

The senior tranche, corresponding to 60% of the portfolio, will be funded by a pool of banks composed of Banca Imi, Mediobanca and Goldman Sachs as arrangers, Credit Suisse, HSBC and Imi as lenders. It’s likely that Gacs will be requested for this tranche.

The second tranche

The remaining 40% is composed by the junior and mezzanine tranches. 51% of the tranches will be subscribed by a special purpose vehicle owned by Intrum and other co-investors, which will act as the sole investor for governance reasons. Intesa Sanpaolo will subscribe the remaining 49%. According to some sources. Intrum co-investor might be CarVal Investors which will provide 20% of the necessary capital. As Il Sole 24 Ore wrote, Intrum is meant to pay 156 million by the end of April, while the remainder will be paid in November. This scheme will make possible the disposal of impaired loans by the end of the year.

The offer in detail

The Bank’s Board of Directors will assess the offer. The proposal might provide a capital gain of about 400 million euro after taxes in the consolidated accounts of the group. The servicing platform, in fact, is valued 500 million euro, while the loans to securitise are approximately 3.1 billion euro.

The numbers of the operation

Intesa Sanpaolo has already a good credit quality, with the NPLs on total credits ratio equal to 5.5% net of adjustments, while it was 8.2% at the end of 2016. The bank achieved with two years in advance its objective of bringing the ratio below 6% by the end of 2019. In 2017, Intesa reduced its gross NPL stock by 13 billion euro. Concerning the terms of the agreement to be discussed by the Board, the new company created by the merger of Intesa and Intrum will be composed of servicing by 40 billion euro, with 51% of the platform held by Intrum and 49% by Intesa Sanpaolo.

The terms of the operation

The servicing contract for Intesa’s bad loans at market conditions will have a duration of ten years. The process will concern about 1,000 employees, 600 of which are Intesa Sanpaolo employees. The staff will receive professional training. The closing for the transfer of the large NPL portfolio is set for November 2018. The transaction will have the following structure: a pool of primary banks will subscribe a senior tranche corresponding to 60% of the price of the portfolio, the junior and mezzanine tranches equal to the remaining 40% will be subscribed for 51% by a special purpose vehicle (owned by Intrum and one or more co-investors acting as a sole investor for governance reasons) and by Intesa for the remaining 49%.

Source: Start Mag

Translator: Cristina Ambrosi

S&P: a standstill of the economy is coming up. NPLs have to be further reduced

14 February, Fortune Italia

In order to be safe from a potential stagnation of the global economy, the rating agency S&P Global has recommended to several European banks – Italian ones included – to continue reducing their NPL stock. S&P acknowledged the good work done by Italy so far. It believes, however, that “Italian banks would be the most impacted by a possible standstill of the economy”, considering the difficulties the country is going through, as it has just entered into a technical recession phase. Moreover, the Italian banking system “is particularly exposed to the credit on merit of domestic companies, representing about 55% of the loans and 77% of the impaired loans, as these companies are the most vulnerable to the economic cycle”.

As the rating agency reminds, the bad loan stock in Italian has decreased from 2015 by 40%, while provisions have gone from 47% to 54%, although the net npe ratio (the impaired loans/total assets ratio) in 2018 was steady at 5.5%. Such a result is “well above the European average of 1.7% and the benchmark of 2.5% recommended by the Euro Summit last December”. A pat in the back won’t be enough to deal with the challenges waiting ahead.

According to S&P, Italy is not the only country which will have to work more. Several banks “will have to make further efforts to solve the issue of the asset quality before the next negative cycle of the economy. For this reason, we expect that Southern European and Irish banks would continue reducing their NPL stocks in 2019 and 2020, especially through their sale”, states S&P in its report on European banks.

Source: Fortune Italia

Translator: Cristina Ambrosi

Carige: the data room for the NPLs and the merger has already opened

06 February, Finanza Report

Carige has already begun the data room for the transfer of bad loans and the merger.

As announced by the newspaper La Stampa, the Treasury-owned Sgd has already accessed the documentation regarding the transfer of bad loans for 1.5 billion. The dossier seems to have gotten the attention of Credito Fondiario and Illimity.

Concerning the merger, the consultant Ubs has already opened the data room, which is accessible upon signing of a non-disclosure agreement. However, the transfer of bad loans might have the priority since this would make the bank more appealing to a subject potentially interested in the operation.

The Carige stocks continue being suspended on the Stock Exchange.

Source: Finanza Report

Translator: Cristina Ambrosi

Medium-sized banks selling NPLs for over one billion

05 November, Il Sole 24 Ore

Several Italian medium- and small-sized banks launched the sale of their bad loan portfolios. The banks concerned were Banca Popolare del Lazio, Gruppo Cassa di Ravenna, Banca Popolare Puglia e Basilicata, Popolare di Bari, and Cassa di Risparmio di Orvieto. The banks transferred to the vehicle Pop Npls 2018 NPLs for over 1 billion euro for their securitisation. The operation involved 16 Italian banks in total.

More in detail, Popolare di Bari and Cassa di Risparmio di Orvieto transferred two NPL portfolios for a value respectively of 652.1 and 76.3 million euro, amounting in total to 728.4 million euro. Banca Popolare del Lazio sold a similar portfolio at the end of October for a total amount of 120.5 million euro. Banca Popolare di Puglia e Basilicata completed its NPL reduction process amounting to 140 million. The banks of the group La Cassa di Ravenna also took part in the operation: La Cassa di Ravenna, Banca di Imola and Banco di Lucca e del Tirreno. The banks transferred three bad loan portfolios valued respectively, 35.5, 19.5 and 3.8 million euro, for a total amount of 58.8 million euro.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Banca Mps: the Government is evaluating the merger with Carige (and not only)

26 October, Investire Oggi

The spike of spread fosters the tensions in the banking sector. The Government is evaluating a possible merger of Banca Mps, as La Repubblica wrote. The current administration realised that penalising the banks in a country relying so much on credit will stop the economic growth and the occupation.

More spread and more taxes mean less capital for banks, fewer profits and more funding costs for the sector, resulting in less credit for companies and a slower disposal of the old bad loans. An actual landslide, where, if no action is taken, will lead to serious difficulties for the weakest banks such as Banca Carige, Mps and Popolare di Bari, which will be soon followed by Banco Bpm, Bper and Ubi

According to Equita Sim, if we set the Cet1 attention threshold at 11% for venture assets, Carige will be down the SREP by 35 points, Mps above it by 35, and Banco Bpm will have a 1% excess, which “will expose it more to the market volatility”. Moreover, Banco Bpm has NPL transfers in the pipeline that the country risk for Italy will make less attractive. In 2017 the banking system disposed of NPLs for 70 billion, while of the announced transfers for the remaining 70 billion planned for this year, only half of them have been carried out. Because of this burden and the unfavourable economic situation, bankers are cautious about new investments.

It will be necessary new capital for new credits and to clean up the old ones. State bailouts are to be excluded: there is no public money. Moreover, considering the unpopularity of the instrument, it’s very unlikely to get the green light from Brussels, especially not before the private members will not have paid first, as the bail-in regulation requires. The issuance of bank obligations has been suspended since May, except for a bond of Intesa Sanpaolo at very high rates. Mps will try to ask for more time to the EU Commission regarding a subordinate loan scheduled for this year, while Carige will assign the purchase of the bonds is about to issue to its majority shareholders.

There is a solution, which the Treasury, bankers and consultant are hopeful for. It’s the possibility of mergers. This system has been already used, and it might solve the situation of some banks by creating bigger and stronger groups. The Government started discussing this possibility during the summit on 17th October. It would mean diluting the state-owned 68% of Mps with a bank selected among Ubi, Bper or Banco Bpm, creating in this way the third Italian bank and complying with the commitment of privatising Mps by 2021, as agreed by the Gentiloni administration with the EU.

Source: Investire Oggi

Translator: Cristina Ambrosi

The Charlot operation has started. CheBanca! (Mediobanca) selling NPLs for 140 million

24 October, Il Sole 24 Ore

CheBanca!, Mediobanca group, launched the Charlot operation. The project allegedly concerns a 140 million portfolio of bad loans backed by residential mortgages originated from privates.

The operation might conclude by the end of the year if the offers received will be deemed satisfying. The bank has been monitoring the market in the past few weeks to get an understanding of the current offered prices. It is indeed not sure about the conclusion of the operation, and CheBanca might decide to keep the NPLs.

If the operation is successful, it will allow CheBanca! to halve the bad loans currently on the accounts, further improving the quality of its assets, which is already very high. The gross bad loans of the bank, in fact, amount to 335 million with an impact on the total assets equal to little more than 4%, while the net bad loans dropped to 137.8 million, representing the 1,7% of the total assets.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

Three funds for the Mps assets

13 September, Milano Finanza

Mps is currently evaluating different options to implement the reorganisation plan agreed with the European authorities. Among these, there is the possibility to transfer a significant portfolio of operating real estate assets valued one billion euro in total. The assessment started last spring with the support of the advisor Duff & Phelps Reag, registering the interest of Italian and international investors. According to Milano Finanza, the portfolio got the attention of Lonestar, Blackstone and Hines, which started evaluating the whole portfolio or some specific positions. The portfolio mainly concerns the branches that had been closed during the reorganisation plus other properties owned by the bank.

Moreover, it’s not to exclude that a sale & leaseback will be applied to the portfolio, as other banks have done in the past few years. The management is not rushing for closing the operation, and it will proceed with the negotiations only if the investors will appropriately evaluate the assets. After all, the current market situation demands caution and the Ceo Marco Morelli wants to avoid counter-productive deals, as demonstrated by the caution the bank showed in another operation recently started.  At the beginning of the year, Mps put for sale the IT platform which got offers from Engineering, a subsidiary of the British Apax together with NB Renaissance and from Fondo Strategico Italiano, which could have involved Cedacri in the competition. Also in that case, Mps took its time to evaluate the economic proposals of the candidates.

Meanwhile, the de-risking of the assets is going on at a faster pace. While the maxi-securitisation for 26 billion euro as required by the ECB concluded in May, there are new projects currently developing. At the beginning of the summer, Mps launched the so-called Morgana project which initially came with two options: either the sale of the subsidiary Mps Leasing & Factoring or the transfer of the non-performing loans and unlikely-to-pay originated from leasing for a total value of two billion. The bank now seems to lean toward the second option, and several players have already manifested their interest.

Banca Ifis, Hoist, Cerberus, Mb Credit Solutions (group Mediobanca) and Kruk Among are some of the players interested in the Mps assets. The accounts also show the commitment to the de-risking process. On 30th June the bank forecasted the reduction of the npe ratio, namely the ratio between impaired credits and total credits, by the end of the reorganisation plan in 2021. With the completion of the maxi-securitisation, the exposure to bad loans has also reduced, going from 68.8% in March to 56%. Besides, the bank has been cutting costs throughout the first part of the year. As a result, the operational costs decreased by 8.9% with 1,154 million, 734 million of which are personnel costs, which declined by 8.2% on a yearly basis due to the redundancies. At the end of June, Mps had over 23 thousand employees and 1,597 branches, 150 less from December, half of those it had twelve years ago, after the incorporation of Antonveneta.

Source: Milano Finanza

Translator: Cristina Ambrosi

Unicredit is about to transfer NPLs for 2 billion

11 September, Finanza Report

Unicredit is accelerating again on the disposal of its bad loans.

The bank led by Jean Pierre Mustier is working on the transfer of two NPL portfolios, one secured (Milano project) and the other one unsecured (Torino project)

The portfolios have a value of 1 billion euro each, according to Sole 24 Ore.

The Milano project includes non-performing loans mostly guaranteed by properties, and it’s currently in the process of receiving the non-binding offers. In this preliminary stage, some American specialised groups are among the competitors.

The Turin project is at a more advanced stage, being currently dealing with the binding offers. Cerberus and Banca Ifis are allegedly among the competitors for the portfolio.

Moreover, Unicredit is also working at defining the process for Sandokan 2, replicating the first operation for the management of impaired and non-performing loans launched in autumn 2015. In that occasion, the operation saw the participation of the funds Pimco, Gwm and Aurora Recovery Capital. Sandokan 2 is valued at 2 billion euro with NPLs divided between various tranches.

Yesterday the Unicredit shares registered a 4% increase, while today at 09:02 they were at +0.75% with 13.648 euro and the Ftse Mib at +0.47%.

Source: Finanza Report

Translator: Cristina Ambrosi