THE ITALIAN SCENARIO - nplmeeting.it · Unsecured Mixed Secured Consumer NPL Transactions - Bn€...

THE ITALIANSCENARIO

SPECIAL EDITION

NPL MEETING

SEPTEMBER2017

2

MARKET WATCH NPL // Special Edition September 2017

Executive Summary.

Italian macroeconomic scenario>> pag 3

o Signs of economic recovery confirmed in the first half 2017: the GDP is showing a clear positive trend, which began in early 2013. According to the latest ISTAT calculation, the value is confirmed to grow 1,5% vs Q2’16

o Corporate risk improvement: bankruptcies are declining steadily since 2015 and for the first time aligning to 2011 level o Households are increasing their purchasing power: the trends of disposable income and real estate transactions confirm

the increase

Italian NPL scenario>> pag 6

o First positive turnaround in NPE trend: due to relevant disposal and to more accurate managemento The NPL market size could benefit by recent bank writedowns and relevant UtP amounto The historical trend of balance between new bad loan positions and closed ones indicates a decreasing value, probably

thanks to higher NPL portfolio selling

NPL Transactions on the Italian market>> pag 10

o NPL Transactions are expected to grow exponentially reaching the massive amount of 104 Bn€ in 2017o Increasing volumes on secured category vs decreasing volumes of Consumer and Unsecured portfolio disposalo Among Top 10 investors only Anacap, Kruk and partially Banca IFIS highlight diversified investments; other buyers seem to

be focused on a single portfolio typeo Market prices are changing because the market is becoming wider and more efficient

Focus on the NPL pipeline>> pag 14

o 70,6 Bn€ are expected to be released on the market in 2017; 32,2 Bn€ are next to closingo Pipeline shows mixed deals will lead the market with an average price of 21% even excluding the MPS dealo Estimated of market value of the 2017 pipeline is around 14,4 Bn€

Servicing market>> pag 18

o Acquisition of specialized servicing platforms is a key requirement for operating in the NPL marketo Servicers acquired by international investors are focused on both secured and unsecured specializations

ITALIAN MACROECONOMIC SCENARIO

4


Signs of economic recovery confirmed in H1 2017.

Sources: ISTAT; Cerved; Unioncamere

GDP - Bn€

Bankruptcies - K units

+ 1,5% vs Q2’16

HIGHLIGHTS

o The GDP is showing a clear positive trend beganin early 2013. According to the latest ISTAT calculation, the value is growing by 1,5% vs Q2’16

o Bankruptcies have been declining steadily since 2015; in H1 2017, the value is around 15,7% less than H1 2016

6,1 6,1 6,26,4

7,07,2

7,8 7,9

7,47,5

7,2

6,5

6,1

397,5

380,0

385,0

390,0

395,0

400,0

405,0

410,0

Q1'

11

Q2'

11

Q3'

11

Q4'

11

Q1'

12

Q2'

12

Q3'

12

Q4'

12

Q1'

13

Q2'

13

Q3'

13

Q4'

13

Q1'

14

Q2'

14

Q3'

14

Q4'

14

Q1'

15

Q2'

15

Q3'

15

Q4'

15

Q1'

16

Q2'

16

Q3'

16

Q4'

16

Q1'

17

Q2'

17

- 15,7% vs H1’16

5


Purchasing power and real estate market keep on growing.

*NTN is a measure of the transactions, weighted on the actual share of property object of the exchange // Sources: ISTAT; Agenzia delle Entrate

Household disposable income - Bn€

278,6

250

255

260

265

270

275

280

Q1'

10

Q2'

10

Q3'

10

Q4'

10

Q1'

11

Q2'

11

Q3'

11

Q4'

11

Q1'

12

Q2'

12

Q3'

12

Q4'

12

Q1'

13

Q2'

13

Q3'

13

Q4'

13

Q1'

14

Q2'

14

Q3'

14

Q4'

14

Q1'

15

Q2'

15

Q3'

15

Q4'

15

Q1'

16

Q2'

16

Q3'

16

Q4'

16

Q1'

17

+ 2,4% vs Q1’16

HIGHLIGHTS

o Households are increasing their purchasing power, counting on higher disposable income

o The real estate market is continuing the positive trend highlighting the highest Q1 starting from 2012 and an increase of approximately 9%

Residential Real Estate - NTN (number of real estate standardized units exchanged)*

+ 8,6% vs Q1’16

121.976

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

Q1'

10

Q2'

10

Q3'

10

Q4'

10

Q1'

11

Q2'

11

Q3'

11

Q4'

11

Q1'

12

Q2'

12

Q3'

12

Q4'

12

Q1'

13

Q2'

13

Q3'

13

Q4'

13

Q1'

14

Q2'

14

Q3'

14

Q4'

14

Q1'

15

Q2'

15

Q3'

15

Q4'

15

Q1'

16

Q2'

16

Q3'

16

Q4'

16

Q1'

17

ITALIAN NPL SCENARIO

7


First positive turnaround in NPE trend: due to relevant disposal and to more accurate management.

*Provisional figure from Banca d’Italia // Sources: Banca d’Italia, latest available update

192,0173,6

71,2 65,8

0

50

100

150

200

250

H12011

H22011

H12012

H22012

H12013

H22013

H12014

H22014

H12015

H22015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

July2017*

Gross Bad Loans Net Bad Loans

Bank and CDP NPE Total - Bn€ HIGHLIGHTS

o From 2016 wee see the first positive turnaround in the total NPE

o In Q2 and July 2017 show a relevant decrease in gross and net bad loans

o The net bad loans are now at the same level of 2012 but the gross bad loans are 39% higher

Bank and CDP Bad Loans - Bn€

326,2

0

50

100

150

200

250

300

350

400

H12011

H22011

H12012

H22012

H12013

H22013

H12014

H22014

H12015

H22015

Q12016

Q22016

Q32016

Q42016

Q12017

8


The growth of NPL transactions will receive a boost from large writedowns and from the potential new amount of bad loans coming from the “unlikely to pay” category.

*Provisional figure from Banca d’Italia // Sources: Banca d’Italia, latest available update

Bad Loans Coverage - Percentages

62,1%

53%

55%

56%

58%

59%

61%

62%

54,0%

HIGHLIGHTS

o The coverage index reaches a new peak after the upsurge observed in January

o The larger writedowns in early 2017 will potentially foster the future development of NPL transactions because of the narrower demand-supply gap

o Although the trend is decreasing, there is still a relevant amount of non performing exposures that could turn into Bad Loans in the next months

123,4

0

20

40

60

80

100

120

140

160

H12010

H22010

H12011

H22011

H12012

H22012

H12013

H22013

H12014

H22014

H12015

H22015

Q12016

Q22016

Q32016

Q42016

Q12017

Past Due Unlikely to Pay Watchlist Restructured

Classification of impaired loans updated in 2015

Classification of impaired loans - Bn€

9


In the crisis period, new bad loans are ever higher than ones closed; recovery rates are strictly connected to bad loans age and to debtor type.

Source: Banca d’Italia, Note n.7, January 2017

Recovery rates by age of the bad loans - Percentages

Bank Bad Loans - Net balance between New and Closed positions – K Positions

20%

30%

40%

50%

60%

70%

80%

Total o/w: corporate o/w: retail

HIGHLIGHTS

o Over the years the number of closed positions has always been smaller than new bad loans, showing no improvement in the banks’ recovery ability against the increase in credit portfolio risk

o The “disposal capacity”, indeed, stayed stable, showing a sharp increase since 2014, probably due to the higher disposal on the market

o To decrease the difference between new and closed positions banks have to manage their impaired loans from the start and enhance internally their NPE recovery know-how

o The age of Bad Loans is a key factor for recovery success: the older the bad loans, the smaller the recovery rate

o Retail bad loans show above the average rates (even if old positions)

-40

2953 49

106

54

102 116

54 68 69

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New

Closed

159 190 177 183 234 199 231 228 342 326 334

199 161 124 134 128 145 129 112 288 258 265

NPL TRANSACTIONSON THE ITALIANMARKET

11


19,1 17,3

33,4

43

50

36

0

10

20

30

40

50

60

-

5.000,00

10.000,00

15.000,00

20.000,00

25.000,00

30.000,00

35.000,00

40.000,00

2015 2016 2017

Value (Bn €) Number of deals

*Unicredit retains a minority stake: 49% with the best effort to reduce its share // Sources: Banca IFIS NPL Market Database - Press releases and news

NPL Transactions are expected to grow exponentially reaching the massive amount of 104 Bn€.

70,6

62

Expected value in 2017 Expected deals in 2017

104

HIGHLIGHTS

o In Q2 2017 strong growth of the market with volumes 3x vs Q1 2017

o In addition Q3 shows the large Unicredit FINO Project deal* (17,7 Bn€)

o Considering expected deals in the pipeline the 2017 maket size could reach 104 Bn€

NPL Transactions - Bn€ and units

12


HIGHLIGHTS

o Excluding the outlier mixed portfolio, the 3-Yr trend shows increasing volumes for Secured category and decreasing amount for Consumer and Unsecured transactions

o Among Top 10 investors only Anacap, Kruk and partially Banca IFIS highlight diversified investments; other buyers seem to be focused on a single portfolio type

Increasing volumes on secured category: international buyers seem to prefer specialized investments.

Sources: Banca IFIS NPL Market Database - Press releases and news

6.000

3.000

0

2.000

7.000

21.000

1.000

5.000

4.000

Other & UndisclosedSecuredUnsecured**Consumer*Mixed

20172015 2016

Wit

hout

FIN

O

deal

0

2.000

4.000

6.000

8.000

10.000

12.000

D.E. Shaw Deutsche Bank

Christofferson Robb

Banca IFIS Kruk GroupFortress Hoist FinanceAnacapPIMCO Quaestio Capital

Management Sgr

Unsecured

Mixed

Secured

Consumer

NPL Transactions - Bn€ and units

Transactions on the Italian market - Focus buyer Top 10

*Consumer loans are refered to credit cards, line of credit and personal loans** Unsecured loans are refered to banking loan not secured to both retail and corporate debtors

13


Market prices are changing as a result of the market becoming wider and more efficient.

Sources: Banca IFIS NPL Market Database - Press releases and news - internal analysis

0%

3%

5%

8%

10%

13%

15%

18%

20%

23%

25%

28%

30%

33%

35%

38%

40%

43%

45%

48%

Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17

Consumer Unsecured Other Secured CRE Residential GACS

GACS (securitization with public guarantees)

Pri

ce a

s pe

rcen

tag

e of

fac

e va

lue

Average value on balance sheet

37,9%

Weighted average prices on nominal value

HIGHLIGHTS

o The price levels of consumer portfolios (around 11%) are experiencing a different trend: the higher demand and the improved quality of the assets are pushing the prices upo On the opposite, Unsecured category shows a decreasing price

The Secured deals are priced at different levels according to collateral type

FOCUS ON THE NPL PIPELINE

15


70,6 Bn€ are expected to be released on the market in 2017; 32,2 Bn€ are next to closing.


Pipeline - Bn€

Seller Ongoing Announced On plan Grand total

Monte dei Paschi di Siena 26,0 2,5 - 28,5

REV Gestione Crediti - 1,0 9,0 10,0

Banca Popolare di Vicenza - 5,2 - 5,2

Veneto Banca - 5,0 - 5,0

Unipol - - 3,7 3,7

Unicredit - 1,2 1,8 3,0

Caricesena; Carim; Carismi 2,8 - - 2,8

Gruppo Delta - 2,0 - 2,0

Banco BPM - 2,0 - 2,0

Carige - 1,4 - 1,4

Intesa Sanpaolo - 1,4 - 1,4

Hypo Alpe Adria Bank - 0,8 - 0,8

Cassa Centrale Banca - 0,6 - 0,6

Iccrea Banca - 0,5 - 0,5

Banca Popolare di Bari - 0,3 - 0,3

Confidential 3,4 - - 3,4

Grand total 32,2 23,9 14,5 70,6

16


HIGHLIGHTS

o Mixed deals are about to explode in 2017, due to the MPS deal closing expected in December

o The price of the MPS deal will be higher than previous deals in the same category and the buyer will be Atlante

o Unsecured deals show a price of 10%, higher than the trend and probably biased from the small sample analyzed

70,6 Bn€ of pipeline deals can be valued at around 14,4 Bn€ of market value.


Pipeline deal categories – Bn€

21,0% 10,0% 35,0% 11,0%Estimated avg pice %

Estimated Market value Bn€ 12,2 0,7 1,3 0,2

Estimated market value of 2017 pipeline is around 14,4 Bn€

57,9

6,93,8

2,0

Mixed Unsecured Secured Consumer

17


2017 will be the year of large deals.


HIGHLIGHTS

o Big banks are dominating the portfolio offer

Top Sellers NPL transaction – Bn€

4,7

3,0

1,9

2,2

1,3

2,1

20,9

2,8

2,0

1,4

3,7

5,0

5,2

10,0

3,0

28,5

Nuova Banca Etruria; Nuova Banche Marche; Nuova CariChieti

Caricesena; Carim; Carismi

Banco BPM

Intesa Sanpaolo

Unipol

Veneto Banca

Banca Popolare di Vicenza

REV Gestione Crediti

Unicredit

Monte dei Paschi di Siena

2015 2016 2017 Pipeline

SERVICING MARKET

19


The acquisition of specialized servicing platforms is a key requirement for operating in the NPL market.


2015 2016 2017

# M&A Servicer

AuM Bn€

3

~16

7

~20

5

~19

Investors

20


Servicers acquired by international investors are focused on both secured and unsecured assets.

*The new corporate name is Aquileia Capital Servicer **The closing in progress // Sources: Banca IFIS NPL Market Database - Press releases and news; PwC

Servicer name SpecializationM&A Activity

Buyer Years Shareholder Type

CAF Unsecured/Secured/Corporate Lone Star 2015 Investor

Centaurus Credit Recovery Secured/Retail/Corporate Primus 2016 Investor

Credit Base International Unsecured/ Retail Kruk Group 2016 Investor

Credito Fondiario - Fonspa Secured/CorporateTages; Harvest

Investments 2013 Investor

Cross Factor Unsecured/ Retail Lindorff 2016 Investor

CS Union Unsecured/ Retail Axactor 2016 Investor

Finanziaria San Giacomo Unsecured/Secured/Retail/Corporate Cerved 2015 Investor

Gextra Unsecured/ Retail Lindorff 2017 Investor

Guber Unsecured/Secured/Corporate Varde 2017 Investor

Heta Asset Resolution Italia* Secured/Corporate Bain Capital Credit 2017 Investor

Non Performing Loans Spa Secured/Retail/Corporate K.Red 2016 Investor

Prelios** Secured/Corporate Davidson Kempner 2017 Investor

Recus Unsecured/ Retail Cerved 2014 Investor

Sistemia Unsecured/Secured/Retail KKR 2017 Investor

SPC Credit Management Unsecured/Secured/Retail/Corporate Dea Capital 2016 Investor

Tarida Unsecured/ Retail Cerved 2013 Investor

Trc Unsecured/ Retail Hoist Finance 2014 Investor

UCCMB Secured/Corporate Fortress 2015 Investor

Zenith Service Master Servicer Arrow Global Group 2016 Investor

21


A series of large non-captive servicers is active in Italian NPL market.

*Non-exhaustive list// Sources: Press releases and news; PwC

Servicer Name* Main Specialization AuM (~Bn€)

doBank Unsecured 77

Cerved Credit Management Unsecured 12

FBS Unsecured 8

CAF Secured 8

Guber Unsecured 7

Advancing Trade Unsecured 4

MBCredit Solutions Unsecured 4

Fire Unsecured 3

Prelios Secured 3

Officine CST Secured/Usecured 2

Cribis Credit Management Secured 1

AZ Holding Unsecured 1

Fides Unsecured 1

22


General statement

This publication is edited by Banca IFIS.

The information contained herein, obtained from sources believed to be reliable by Banca IFIS,

are not necessarily complete, and their accuracy cannot be guaranteed.

This publication is provided merely for purposes of illustration and information and

does not in any way represent financial and investment advice.

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