Fourteen companies are now licensed by the Bank of Greece to operate in the domestic debt management sector, after the approval on Tuesday of applications from LPN Capital and Melfin. The intense interest seen over the past two years stems from the acceleration of sales to specialized companies of large portfolios of bad loans.
Loan sales are key in reducing banks’ share of non-performing exposures (NPEs) ahead of the new targets that lenders must submit to the European Central Bank’s Single Supervisory Mechanism (SSM) in September.
The new targets will focus on more frontloaded sales to reduce the share of bad loans on their balance sheets to the European average of less than 10 percent by 2021 from a current level of 45 percent – by far the worst among eurozone banks.
Banks are committed to making massive portfolio sales and so far, five packages worth about 16 billion euros (including interest) have been transferred: National Bank’s Earth portfolio, Eurobank’s Eclipse, Alpha’s Venus and Piraeus’s Arctos and Amoeba portfolios. By the end of the year, Alpha and Eurobank are expected to sell three new packages – Mercury, Jupiter and Zenith – with a nominal value of 4.7 billion euros, bringing total sales of bad loans by Greece’s four systemic banks to above 20 billion euros.
As some of the funds that have purchased nonperforming loan portfolios from Greek banks do not have a local management company, the transfer is accompanied by the assignment of the job to specialized companies licensed for this purpose.
A typical case is Intrum, a fund that has bought two large Greek loan portfolios (Eclipse and Earth) and works with with management companies like FPS and Qquant.
Debt management companies are often subsidiaries of large funds that buy distressed loan portfolios and then manage them through the specialized companies they set up, as is the case with Hoist, which has set up a specialized company in Greece, or B2 Kapital, set up in by B2 Holding.