Intrum is said to be close to acquire Credit Management operations od Cerved Group that could be worth some 400m applying the same EV/Ebitda ratio of doValue.
Relevant transactions are also expected with
Unicredit selling 6 Bn (Project Prisma) of NPL -the porfolio includes a mix of secured and unsecured retail loans + a UTP portfolio with some 1 Bn
MPS that could be selling NPLs for 10bn in order to accelerate the balance sheet cleanup needed to make the bank appealing for potential buyers
Meanwhile the stock of Non Performing Exposures is close to a 10 year minimum as reported by NPL Market Watch issued by Banca IFIS
Reduction is quite remarkable also in broad European perspective
So far the outstanding NPL portfolios appear to be skewed towards corporate and secured loans
2019 Pipeline remain quite consistent
Even though 78% of AUM are concentrated in the top 10 special servicers a further consolidation process is expected that could potentially lead to a landscape with top 3 players covering some 60-65% of the market
GACS Scheme is expected to remain a key driver in the process reduction of NPL on Italian banks’ balance sheet while non GACs securitization schemes will be likely used to dispose UTPs
The conference will bring together leading representatives from major banks, private funds, law firms, rating agencies, service providers and more to discuss the industry’s pressing topics, including Overview of Italy’s Banking Sector, Overview of Key Government Efforts to Stabilise the Italian Banking Sector, Application to Other Mediterranean Economies: Implications for Spain, Portugal and Beyond.
The substantial decrease of NPL stock in Italian banks’ balance sheets has been achieved mostly using GACS securitization schemes and Originator – Investor long term partnerships or Joint Ventures both producing a substantial boost for servicing industry.
The final landscape we can expect to see will be therefore likely to have a reduced number of large players that will probably cover some 2/3 of the entire market with smaller players dedicated to remaining market share and active ad a sub servicing level.
Savethedate on September 26th I am going to present a workshop at Banca IFIS‘ NPL Meeting
The NPL Meeting workshops represent a unique opportunity to analyze the dynamics of the NPL world and to discuss what the future of deteriorated credit will hold for us.
Workshops will take place in two highly prestigious locations on Venice Lido: the Excelsior Hotel and the Palazzo del Cinema. A clear and well-defined format: September 26 will be entirely dedicated to workshops, moments of reflection lasting an hour and distributed across three time slots. Between one time slot and another, participants will have 15 minutes to move between the two hosting structures, which are adjacent to one other.
The topic I am going to cover is
The workshop will take place in 2 time slots 2:30 PM – 3:30 PM and 5:00 PM – 6:00
In order to attend the workshop you need to register to the main event at this link
Then you will be allowed to access the workshop page where you can book by clicking on the appropriate button as showed below.
Italian Politics these days looks quite difficult to understand (but I tried to offer a naïve model to read it in this post) and it is hard to say even why the crisis has started and which colors will have the next Government.
A very short and useful explanation has been provided by a friend of mine, professor Sandro Brusco of Stony Brook University :
(…) The bottom line: Italy had a long period of government instability mainly because of its proportional system. The system was (partially) changed in 1994 but it never was entirely majoritarian. After a number of reforms and pronouncement from the Supreme Court the system went back to being essentially proportional in the last election. Thus, in terms of government duration, we are back to the period 1948-1994, the proportional period, in which governments lasted between 12 and 18 months. This government was installed in June 2018, so it basically reached maturity. From that point of view, things are actually quite boring. (…)
than looking pointless explanation of present, it is much easier to foresee behavior
of upcoming government: it will make a deal with EU trading 1) additional
budget flexibility for 2) commitment to make future reforms.
such a deal? Because it will lower present burden on taxpayers, it will reduce
the bad taste of poisoned pill budget law and given the potential risks arising
from US-China trade war and global recession, EU will be happy to pretend to
believe that someday reforms will come.
future is written and present politics conundrum is pointless to explain what
else can be said?
3 short reminders for government to come:
Italy’s problem 1 is demography and current pension system is unsustainable – excess burden on young people provides an incentive for those with best education and the strongest risk appetite to leave the country worsening the situation
Italy’s problem 2 is competitiveness – open new business and keep existing ones alive is more difficult days after day and so many actual and potential entrepreneurs start thinking tha change country is easier than wait that this country changes
Italy’s problem 3 is growth – the more the country grows old and becomes less competitive the less likely it will show a significant economic growth – a wide interference of state in economy and a dysfunctional welfare system are additional ingredients for long lasting stagnation
Has anyone heard about these problems in politicians’ words or on main Italian newspapers? Not really, with some remarkable exceptions.
Bottom line 3 short suggestions for
next government could be
Try to shift part of current burden from young ones to old ones
Try support policies that enhances competitiveness of the country (es Shift burden from less risk adverse people to those who are more risk adverse)
Try to focus more on how to enlarge the pie of potential wealth rather than how to divide the existing one
Why send a letter in English to Italian Government? Maybe the true recipient of the letter is not the Government.
The agreement consists of a 10-year contract for the servicing of UTP Corporate and SME loans of the Intesa Sanpaolo Group to be provided by Prelios initially covering a portfolio worth around €6.7 billion of gross book value, and the disposal and securitisation of a portfolio of UTP Corporate and SME loans of the Intesa Sanpaolo Group worth around €3 billion of gross book value, at a price of around €2 billion which is in line with the carrying value.
SGA, the credit management firm fully owned by Italian Ministry of Economics and Finance, is about to launch the Covee project an investment fund focused on real estate backed UTPs that will involve banks like BancoBpm, Mps, Ubi Banca, and Carige and will be run in partnership with Prelios.
As far as we know, the banks will basically trade the ownership of UTPs with shares of the fund and, since none of them will have the majority of the shares, they will be able to offload the NPEs from balance sheets.
New GACs scheme as explained by KPMG and PWC recent reports, is likely to be a relevant driver for a new wave of NPL deals in future months as the tack record of this tool points out. After GACS introduction, 21 transactions were completed between 2016 and 2019 for a total GBV of € 62.1 bn; 9 deals on total number of transactions had a deal size ranging from € 1 to 5bn. Around 60% of securitized loans are backed by mortgages on real estates properties.
Source: GACS tool in the Italian Non-Performing Loans space
Main differences between “old” and “new” Gacs scheme have been summarized in PWC report
Finally we can consider that securitization schemes with the support of GACs for NPL and a large use of outsourcing for UTPs (with some “share the risk to derecognize” framework to come) are quite addressing the NPE reduction problem of Italian banks.
Once claims have been transferred to SPV the challenge remains to properly manage them in order to collect money in line with committed business plan and this will be the focus of following posts (hopefully after August).
Are you interested in Italian banks and NPL/UTP market? Ask for a briefing (in person or via conference call) by sending me a private message. I am also available for consulting projects on Distressed Assets pricing and Portfolio Management.