All about the problem loans business

Substandard and non-performing loans inexorably grow in Italy. Indeed, more and more Italians are unable to honor their debts, there are delays in paying the monthly installments and, in many cases, the objective impossibility of paying their debt with the banks occurs.

Debt customers are faced with reports in Crif, legal actions and a collapse in terms of financial credibility, the banks, for their part, find in the balance sheet credits that are no longer collectible.

What follows is a credit and mined market at the base

What follows is a credit and mined market at the base

Banks are unable to get profits from credit operations and think about it before disbursing more to households and businesses. As well as debtors, families, and businesses also become no longer eligible for financing.

A situation, it is easy to imagine, of a stalemate in the credit system. Yet there are those who can make a business out of such a stagnant credit situation. A 50 billion dollar business in the coming years, in Italy alone.

These are Teams, companies and companies specialized in the acquisition and management of complicated credits. These operators, which someone defines as “jackals” or “little spaces” of the credit system, have huge liquidity at their disposal, such as to be able to acquire entire bank portfolios of a problem and non-performing loans.

The situation in Italy has probably never been so dramatic. Total non-performing loans amount to 160 billion, practically 9% of the total. In a normal economy, this value should be between 3 and 5%. To this figure are added the problem loans, that is to say, another 150 billion. Meanwhile, banks are also asked by the Capital Lender to keep their accounts in order and, above all, their clean balance sheets. They are then asked to generate profits, thus prompting banks to sell entire portfolios of complicated loans.

It was up to the United States, then to Spain: apparently now it’s up to our country. Previous number one comments on the current Italian situation, anticipating the future moves of the operators who will appear on the Italian scene to make a profit from the misfortunes of others:

It is a particularly active market

It is a particularly active market

In which the world of opportunistic negotiators has focused absolutely on Italy after last year had been the year of Spain. The huge amount of liquidity that is present on the market is being, therefore, concentrating here, therefore we expect sales of portfolios of non-performing loans in the order of $ 50 billion over the course of a couple of years.

In any case, today the Italian banking system is in such an anomalous situation that it is unlikely that it will be able to manage such a mass of problem loans internally, so the part will be transferred, the part will be outsourced.

And here we come as institutional and independent specialized operators. To date, we originate and assist portfolios amounting to around 10 billion offer.

Who are the protagonists right now?

Who are the protagonists right now?

The big opportunistic funds, as I said. Whitehall and many others who have tens of billions of dollars under management. On the other, there is the whole banking system, which is gradually approaching the intersection of supply and demand. There seems to be a “stop and go” trend, with accelerations and then stops, also by the Bank of Italy.

My impression is that until the beginning of this year this type of operation was quite blocked, basically because the book value of these NPLs was quite far from the price that the investors were willing to pay.

Non-performing loans of the Italian banking system are in charge of around 55% of their face value, with provisions for around half. And on average, those who buy loans with underlying mortgages do so at 20-30% of the face value.