Is the Italian NPL volcano ready to erupt?

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The volume of non-performing loan (NPL) transactions in 2015 doubled compared to 2014, with the amount of disposed loans reaching €19bn at the end of last year. The first quarter of 2016 began with €5bn of new deals in the market across the consumer, secured and secured leasing areas.

The government has put various reforms in place to give a clearer and leaner context for NPL market players: acting to improve procedures and shorten foreclosure timelines via legal and regulatory measures; facilitating NPL portfolio funding (GACS) and improving the tax regime.

In the meantime the investor base is confirming its interest and commitment to the Italian market, not only through portfolio investments but also via more complex structured deals involving platforms and financial institutions.

In parallel with government reform and investor interest, there is also the recently formed Atlante fund. At the moment it’s not clear whether this will be an accelerator of deal flow or whether its impact will be marginal given its limited capitalisation. It might be counterproductive as it could improve the situation of a few selected banks. But this could come at the cost of increasing, directly or indirectly, the non-performing exposures (NPEs) of healthier banking institutions and increasing interlinkage.

With gross NPE stock in excess of €340bn and pressures on banks to reduce these exposures, Italy remains one of the largest global markets for non-performing assets (NPAs).

There is greater government and regulatory support for, and commitment to, the sale and resolution of NPL credits compared to previous market cycles to accelerate bank sector rehabilitation and improve the real economy. In conjunction with this, banking sector wide pressures imply a more comprehensive NPL sales cycle than prior Italian NPL market cycles.

For full details of the Italian NPL market download our report here.

 Get in touch if you would like to discuss any aspect of the Italian NPL market or share your thoughts in the comments box below.

Richard Thompson |  Global Leader, Portfolio Advisory Group
Profile | Email | +44 (0)20 7213 1185

 

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