Securitisations and direct sales of non-performing loans from banks to funds continue unabated, in an attempt by the industry to hit the “gas” in the last mile.
This year, although only one transaction has been completed, the €1 billion “Frontier II” securitisation of National Bank, 11 more transactions are expected to be completed, driven by Hercules III, which has even been extended by €1 billion until mid-2025.
Transactions pending by the end of the year include the four tranches of the “Solar” syndicated securitisation (one for each systemic bank) and the “Frontier III” securitisation of Ethniki intended for inclusion in the expanded “Hercules III” with a guarantee of €3 billion. In addition, six direct sales of NPEs are in the pipeline: Alpha Bank’s Gaia for €500 million, Eurobank’s Leon for €640 million, Ethniki’s Pronto for €30 million, Piraeus’ Monza for €120 million, Piraeus’ Delta for €34 million and PQH’s “Alphabet” for €5.2 billion from liquidator PQH.
As consultancy Octane points out in its report, one of the market’s biggest bets for the 2024-25 biennium is the reintegration of loans that “greened the economy” – along with hundreds of thousands of borrowers who are currently excluded from bank financing. Another critical issue for private debt is the treatment of defaulted portfolios, since the recovery rate of Heracles’ securitised portfolios is estimated at 25-30%, significantly lower than the initial estimates on which the programme’s architecture was based in 2019.
It is worth noting that the low performance of civil servants in these departments is responsible for both the freezing of auctions during the pandemic and the mobilizations of lawyers who paralyzed the system of forced executions. To compensate for the reduction in revenue, investors and servicers are selling portfolios on the secondary market, which already has 11 transactions in our country and is expected to grow even more in the coming years.
The 70 agreements that “greened” banks
More than 70 red loan transactions have occurred in the last eight years between banks and investors/management companies, totalling €80 billion, leading to a radical consolidation of the national banking system from the “deep red” of the financial crisis.
It should be recalled that a necessary condition for the radical transformation of the banking sector in the aftermath of the 10-year crisis was the creation of a parallel market, that of non-
of serviced loans, which was built at an accelerated pace by funds and managers that invested in Greece after 2017.
The first direct sales included Eurobank’s €1.5 billion “Eclipse” portfolio (2017), followed by Alpha Bank’s €2 billion “Venus” (2018), Piraeus’ €1.45 billion “Amoeba” (2018) and Ethniki’s €100 million “Earth”. The first securitisations implemented on the favourable terms of “Hercules” include Eurobank’s €2.3 billion “Cairo” (2020), followed by €450 million “Phoenix” (2020) and €4.9 billion “Vega” – both from Piraeus.
In 2021, red loan deals continued at a brisk pace, with a total of 10 completed, all of them direct portfolio sales, as the government-guaranteed securitisation programme “Hercules” was not “up and running”.
As recently confirmed by the Minister of National Economy and Finance, Kostis Hatzidakis, the non-performing loan ratio fell to 7.5% in March (expected to fall below 5% in 2024), compared to 40% in July 2019, while overall NPEs located in the hands of banks and service providers decreased from €92 billion in 2019 to €69 billion in 2023.