European Debt Sales - Italy

European Debt Sales - Italy

An in-depth look into how the loan sale market performed in 2015 in Italy.

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“After several years of delay, Italian banks havestarted the deleveraging process for non-core assets. The early rise of the real estate market will boost NPLvolumes transacted within the next 12–18 months, and help to reach the volumes seen in other European countries.“ – Domenico Torini, Director, Corporate Finance, KPMG in Italy

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Italy had a reasonable year in the portfolio transaction market, mainly driven by unsecured retail transactions totaling €5.5 billion.

2016 is expected to be a strong year for the transaction pipeline. While retail portfolios are expected to continue being brought to market, it is the secured portfolios in the pipeline that investors have long been eyeing.

Wider consolidation and rationalisation in the Italian market will both inhibit and drive transaction activity: many sales have been recently focused on capital and survival, not deleveraging. 

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Other developments

In the first half of 2015, close to €8 billion of loans were traded in Italy. Many of the portfolios were consumer portfolios, however there are an increasing number of real estate-backed portfolios being brought to market.

Three of Italy’s largest banks, UniCredit, Intesa Sanpaolo, and MPS, have established internal bad loan divisions to house non-core assets and have set out deleveraging strategies, which include NPL sales. 

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Looking forward & KPMG predictions

The European Central Bank’s stress tests have kept the Italian banking sector in the spotlight; the Italian loan sale market is expected to accelerate in the coming year as both unsecured and secured portfolios will be brought to market by many of the largest Italian banks.

The Italian regulators are pushing banks to sell not just non-performing loans, but also performing assets that consume too much risk-weighted regulatory capital.

Levels of loan sale activity are likely to grow as the government aims to shorten enforcement timings in a bid to increase the attractiveness of acquiring secured loan portfolios, particularly by international investors.

The prospect of a stable economy, a potential upturn in the real estate market, coupled with more realistic provision levels, will likely lead to an increased number of NPL transactions in the coming years. 

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