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With a GDP growth of 0.5%, there would be a positive impact on the price of Npl

by Marco Ferrando

Even the price of non-performing loans (Npl), impaired loans which hold the balance sheets of Italian banks, depends on the performance of the GDP. “If it were to materialize in 2015, the GDP growth of 0.5%, there would be a positive impact also on the price of Npl” said the CEO of UniCredit, Federico Ghizzoni, a few days before Christmas.
Like insiders keep saying, the purchase of a “sick credit” brings with it the risk that it is incurable (that is to say, never repaid, not even in part); and if the economy does not run, the risk obviously grows. This is how another provisional year for the market of Npl is explained: just 3 billion in sales in the first six months of 2014, and from July - with banks struggling with AQR and stress tests - nothing has changed. And yet, the merchandise to sell is not lacking, conversely: in late October, the gross Npl of the Italian banking system almost reached the threshold of €180 billion, over 30 billion more than a year ago; if you add up problem loans and other non-performing lines, then you get more than €300 billion: at least 50 of these would be potentially for sale, crossing different common estimates.
But it is all a matter of price, it was said. Although it is true that potential buyers - mostly foreigners – are not missing, what they put forward remains well below the price at which banks are willing to sell: the former offer on average 10-20% of the underlying loan, the latter ask for 40-50%, which roughly corresponds to the value at which loans are recognized in the balance sheet after several rounds of devaluations. “Many believed that the comprehensive assessment would help to clarify and align supply and demand,” explains a manager in charge of a large popular bank, “instead, the market has not been unlocked yet.”
“On prices there have been few changes in recent months: there was a positive trend in the first months of 2014 followed by a stabilization,” stressed Ghizzoni, adding that “We are constantly in talks with potential counterparts, to see if demand and supply intersect.”
Meanwhile, banks are trying to gear up. Intesa Sanpaolo, which has also assigned its capital light bank led by Giovanni Gilli a stock of loans (about half of the 50 billion of total assets), Credito Valtellinese, that has signed an agreement with Cerved (provider of services linked to economic-financial information) for the management of non-performing credits; similarly, Iccrea has chosen Italfondiario, while Banca Etruria, which in Npl sees the cause of most of its diseases, has decided the unbundling in an ad hoc division. Different solutions for a single goal: to be ready when the market will start again.