NPL portfolio offers are ‘humiliating’

The foreign funds that are scouring the Greek market for opportunities are making offers similar to those made in Romania for the acquisition of nonperforming loans (NPLs) in banks’ portfolios – mainly consumer loans.

Local bank representatives note that the prices offered are “humiliating” as they start from as low as 1 percent of the original amount for loans that have not been repaid for over two years, and never reach 10 percent, even for loans delayed in the last year.

The same sources explain that those offers are close to those made to the Romanian banking system, where lenders recently reported sales of consumer loan portfolios for prices starting from 0.5 percent for definitively delayed loans and reaching up to 10 percent for loans with a three-month delay.

The disappointingly low offers are attributed to the market’s assessment of the economy’s prospects and forecasts for the unemployment rate, on which the prospect of the repayment of even a small part of those loans depends.

In an effort to find a way to offload their NPLs, Greek banks are examining the option of creating baskets with a variety of loans and valuations in a bid to pave the way for more attractive prices, although this appears somewhat premature for now.

With the official bad loan rate for consumer credit at 45 percent – the actual rate is estimated at 60 percent – as well as the continuing recession and jobless rate estimates near 30 percent for next year, the offers arriving at banks are quite discouraging and presuppose additional provisions.

So far, no bank has made provisions for 100 percent of its bad loans, except in the case of loans delayed by over five years, so the difference between the price they sell at and the provision they must enter in their books must be covered by their own funds, which the credit market has been deprived of.

Although the funds that acquire the bad loan portfolios aim to make arrangements with debtors so that they collect a part of the loans due in order to profit on their investment, the chances of that not being possible have increased, regardless of how generous the loan haircut is.