NPL Portfolio Sales Beyond Wildest Dreams

19/11/2014 – Cinco Dias

A decade back, who would have thought the REO and NPL portfolios purchase and sales would become such a lucrative business. The more that speculative funds, mainly Anglo-Saxon, decided to come to Spain around 5 years ago to buy what was considered the leftovers of the overdone sector additionally battered by crisis.

In the first two-three years, it seemed they had more equity at hand than they could acquire. They were already experienced in shopping risky assets in Italy, Germany, France or the United Kingdom but Spain looked different. Before spending a penny in the country they had known that Spain was still pending deleveraging a more than €400 billion amount, a chance they just could not miss. However, it also turned out that no one wanted to sell at prices slashed by 75% – 85%.

This started to change three years ago and ever since the business went on spreading like wildfire. So much that during that time it has been beating records to such an extent that even optimists were taken aback.

All experts asked about their opinion on the business put emphasis on the astonishing growth in non-performing portfolio sales. And the funds that only wanted to seal some deals in Spain decided to settle down and expand. From January to September, €22 billion in this type of loans has been transferred for slightly above €6 billion total. But the same specialists coincide in a guess that still before the end of the year, a €10 billion worth of NPLs might be sold, due to an effect usually seen in the last months, a genuine ‘sales boost’.

These figures could not have been predicted by anyone. For the next year, experts forecasted a €20 billion volume. One must remember that many of this year’s transactions were somehow ‘unique and difficult to repeat’, however specialists suppose the same might occur in 2015.

For instance, the sale of a €6.4 billion NPL portfolio by CatalunyaBanc to Blackstone for €3.61 billion. Still, banks ought to reduce the €300 billion load in their balance sheets.

Together with the business expansion and rise in prices the funds are willing to pay, the discounts reach 60%. This way, it is expected that the operations may see revenues of €7 billion in 2015. Moreover, the pricing gap between demand and supply narrows and now large part of these assets is secured.


Original article: Cinco Días (by Ángeles Gonzalo Alconada)

Translation: AURA REE