THE ITALIANSCENARIO
SPECIAL EDITION
NPL MEETING
SEPTEMBER2017
2
MARKET WATCH NPL // Special Edition September 2017
Executive Summary.
Italian macroeconomic scenario>> pag 3
o Signs of economic recovery confirmed in the first half 2017: the GDP is showing a clear positive trend, which began in early 2013. According to the latest ISTAT calculation, the value is confirmed to grow 1,5% vs Q2’16
o Corporate risk improvement: bankruptcies are declining steadily since 2015 and for the first time aligning to 2011 level o Households are increasing their purchasing power: the trends of disposable income and real estate transactions confirm
the increase
Italian NPL scenario>> pag 6
o First positive turnaround in NPE trend: due to relevant disposal and to more accurate managemento The NPL market size could benefit by recent bank writedowns and relevant UtP amounto The historical trend of balance between new bad loan positions and closed ones indicates a decreasing value, probably
thanks to higher NPL portfolio selling
NPL Transactions on the Italian market>> pag 10
o NPL Transactions are expected to grow exponentially reaching the massive amount of 104 Bn€ in 2017o Increasing volumes on secured category vs decreasing volumes of Consumer and Unsecured portfolio disposalo Among Top 10 investors only Anacap, Kruk and partially Banca IFIS highlight diversified investments; other buyers seem to
be focused on a single portfolio typeo Market prices are changing because the market is becoming wider and more efficient
Focus on the NPL pipeline>> pag 14
o 70,6 Bn€ are expected to be released on the market in 2017; 32,2 Bn€ are next to closingo Pipeline shows mixed deals will lead the market with an average price of 21% even excluding the MPS dealo Estimated of market value of the 2017 pipeline is around 14,4 Bn€
Servicing market>> pag 18
o Acquisition of specialized servicing platforms is a key requirement for operating in the NPL marketo Servicers acquired by international investors are focused on both secured and unsecured specializations
ITALIAN MACROECONOMIC SCENARIO
4
MARKET WATCH NPL // Special Edition September 2017
Signs of economic recovery confirmed in H1 2017.
Sources: ISTAT; Cerved; Unioncamere
GDP - Bn€
Bankruptcies - K units
+ 1,5% vs Q2’16
HIGHLIGHTS
o The GDP is showing a clear positive trend beganin early 2013. According to the latest ISTAT calculation, the value is growing by 1,5% vs Q2’16
o Bankruptcies have been declining steadily since 2015; in H1 2017, the value is around 15,7% less than H1 2016
6,1 6,1 6,26,4
7,07,2
7,8 7,9
7,47,5
7,2
6,5
6,1
397,5
380,0
385,0
390,0
395,0
400,0
405,0
410,0
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
Q1'
15
Q2'
15
Q3'
15
Q4'
15
Q1'
16
Q2'
16
Q3'
16
Q4'
16
Q1'
17
Q2'
17
- 15,7% vs H1’16
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MARKET WATCH NPL // Special Edition September 2017
Purchasing power and real estate market keep on growing.
*NTN is a measure of the transactions, weighted on the actual share of property object of the exchange // Sources: ISTAT; Agenzia delle Entrate
Household disposable income - Bn€
278,6
250
255
260
265
270
275
280
Q1'
10
Q2'
10
Q3'
10
Q4'
10
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
Q1'
15
Q2'
15
Q3'
15
Q4'
15
Q1'
16
Q2'
16
Q3'
16
Q4'
16
Q1'
17
+ 2,4% vs Q1’16
HIGHLIGHTS
o Households are increasing their purchasing power, counting on higher disposable income
o The real estate market is continuing the positive trend highlighting the highest Q1 starting from 2012 and an increase of approximately 9%
Residential Real Estate - NTN (number of real estate standardized units exchanged)*
+ 8,6% vs Q1’16
121.976
40.000
60.000
80.000
100.000
120.000
140.000
160.000
180.000
Q1'
10
Q2'
10
Q3'
10
Q4'
10
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
Q2'
13
Q3'
13
Q4'
13
Q1'
14
Q2'
14
Q3'
14
Q4'
14
Q1'
15
Q2'
15
Q3'
15
Q4'
15
Q1'
16
Q2'
16
Q3'
16
Q4'
16
Q1'
17
ITALIAN NPL SCENARIO
7
MARKET WATCH NPL // Special Edition September 2017
First positive turnaround in NPE trend: due to relevant disposal and to more accurate management.
*Provisional figure from Banca d’Italia // Sources: Banca d’Italia, latest available update
192,0173,6
71,2 65,8
0
50
100
150
200
250
H12011
H22011
H12012
H22012
H12013
H22013
H12014
H22014
H12015
H22015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
July2017*
Gross Bad Loans Net Bad Loans
Bank and CDP NPE Total - Bn€ HIGHLIGHTS
o From 2016 wee see the first positive turnaround in the total NPE
o In Q2 and July 2017 show a relevant decrease in gross and net bad loans
o The net bad loans are now at the same level of 2012 but the gross bad loans are 39% higher
Bank and CDP Bad Loans - Bn€
326,2
0
50
100
150
200
250
300
350
400
H12011
H22011
H12012
H22012
H12013
H22013
H12014
H22014
H12015
H22015
Q12016
Q22016
Q32016
Q42016
Q12017
8
MARKET WATCH NPL // Special Edition September 2017
The growth of NPL transactions will receive a boost from large writedowns and from the potential new amount of bad loans coming from the “unlikely to pay” category.
*Provisional figure from Banca d’Italia // Sources: Banca d’Italia, latest available update
Bad Loans Coverage - Percentages
62,1%
53%
55%
56%
58%
59%
61%
62%
54,0%
HIGHLIGHTS
o The coverage index reaches a new peak after the upsurge observed in January
o The larger writedowns in early 2017 will potentially foster the future development of NPL transactions because of the narrower demand-supply gap
o Although the trend is decreasing, there is still a relevant amount of non performing exposures that could turn into Bad Loans in the next months
123,4
0
20
40
60
80
100
120
140
160
H12010
H22010
H12011
H22011
H12012
H22012
H12013
H22013
H12014
H22014
H12015
H22015
Q12016
Q22016
Q32016
Q42016
Q12017
Past Due Unlikely to Pay Watchlist Restructured
Classification of impaired loans updated in 2015
Classification of impaired loans - Bn€
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MARKET WATCH NPL // Special Edition September 2017
In the crisis period, new bad loans are ever higher than ones closed; recovery rates are strictly connected to bad loans age and to debtor type.
Source: Banca d’Italia, Note n.7, January 2017
Recovery rates by age of the bad loans - Percentages
Bank Bad Loans - Net balance between New and Closed positions – K Positions
20%
30%
40%
50%
60%
70%
80%
Total o/w: corporate o/w: retail
HIGHLIGHTS
o Over the years the number of closed positions has always been smaller than new bad loans, showing no improvement in the banks’ recovery ability against the increase in credit portfolio risk
o The “disposal capacity”, indeed, stayed stable, showing a sharp increase since 2014, probably due to the higher disposal on the market
o To decrease the difference between new and closed positions banks have to manage their impaired loans from the start and enhance internally their NPE recovery know-how
o The age of Bad Loans is a key factor for recovery success: the older the bad loans, the smaller the recovery rate
o Retail bad loans show above the average rates (even if old positions)
-40
2953 49
106
54
102 116
54 68 69
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
New
Closed
159 190 177 183 234 199 231 228 342 326 334
199 161 124 134 128 145 129 112 288 258 265
NPL TRANSACTIONSON THE ITALIANMARKET
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MARKET WATCH NPL // Special Edition September 2017
19,1 17,3
33,4
43
50
36
0
10
20
30
40
50
60
-
5.000,00
10.000,00
15.000,00
20.000,00
25.000,00
30.000,00
35.000,00
40.000,00
2015 2016 2017
Value (Bn €) Number of deals
*Unicredit retains a minority stake: 49% with the best effort to reduce its share // Sources: Banca IFIS NPL Market Database - Press releases and news
NPL Transactions are expected to grow exponentially reaching the massive amount of 104 Bn€.
70,6
62
Expected value in 2017 Expected deals in 2017
104
HIGHLIGHTS
o In Q2 2017 strong growth of the market with volumes 3x vs Q1 2017
o In addition Q3 shows the large Unicredit FINO Project deal* (17,7 Bn€)
o Considering expected deals in the pipeline the 2017 maket size could reach 104 Bn€
NPL Transactions - Bn€ and units
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MARKET WATCH NPL // Special Edition September 2017
HIGHLIGHTS
o Excluding the outlier mixed portfolio, the 3-Yr trend shows increasing volumes for Secured category and decreasing amount for Consumer and Unsecured transactions
o Among Top 10 investors only Anacap, Kruk and partially Banca IFIS highlight diversified investments; other buyers seem to be focused on a single portfolio type
Increasing volumes on secured category: international buyers seem to prefer specialized investments.
Sources: Banca IFIS NPL Market Database - Press releases and news
6.000
3.000
0
2.000
7.000
21.000
1.000
5.000
4.000
Other & UndisclosedSecuredUnsecured**Consumer*Mixed
20172015 2016
Wit
hout
FIN
O
deal
0
2.000
4.000
6.000
8.000
10.000
12.000
D.E. Shaw Deutsche Bank
Christofferson Robb
Banca IFIS Kruk GroupFortress Hoist FinanceAnacapPIMCO Quaestio Capital
Management Sgr
Unsecured
Mixed
Secured
Consumer
NPL Transactions - Bn€ and units
Transactions on the Italian market - Focus buyer Top 10
*Consumer loans are refered to credit cards, line of credit and personal loans** Unsecured loans are refered to banking loan not secured to both retail and corporate debtors
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MARKET WATCH NPL // Special Edition September 2017
Market prices are changing as a result of the market becoming wider and more efficient.
Sources: Banca IFIS NPL Market Database - Press releases and news - internal analysis
0%
3%
5%
8%
10%
13%
15%
18%
20%
23%
25%
28%
30%
33%
35%
38%
40%
43%
45%
48%
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17
Consumer Unsecured Other Secured CRE Residential GACS
GACS (securitization with public guarantees)
Pri
ce a
s pe
rcen
tag
e of
fac
e va
lue
Average value on balance sheet
37,9%
Weighted average prices on nominal value
HIGHLIGHTS
o The price levels of consumer portfolios (around 11%) are experiencing a different trend: the higher demand and the improved quality of the assets are pushing the prices upo On the opposite, Unsecured category shows a decreasing price
The Secured deals are priced at different levels according to collateral type
FOCUS ON THE NPL PIPELINE
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MARKET WATCH NPL // Special Edition September 2017
70,6 Bn€ are expected to be released on the market in 2017; 32,2 Bn€ are next to closing.
Sources: Banca IFIS NPL Market Database - Press releases and news
Pipeline - Bn€
Seller Ongoing Announced On plan Grand total
Monte dei Paschi di Siena 26,0 2,5 - 28,5
REV Gestione Crediti - 1,0 9,0 10,0
Banca Popolare di Vicenza - 5,2 - 5,2
Veneto Banca - 5,0 - 5,0
Unipol - - 3,7 3,7
Unicredit - 1,2 1,8 3,0
Caricesena; Carim; Carismi 2,8 - - 2,8
Gruppo Delta - 2,0 - 2,0
Banco BPM - 2,0 - 2,0
Carige - 1,4 - 1,4
Intesa Sanpaolo - 1,4 - 1,4
Hypo Alpe Adria Bank - 0,8 - 0,8
Cassa Centrale Banca - 0,6 - 0,6
Iccrea Banca - 0,5 - 0,5
Banca Popolare di Bari - 0,3 - 0,3
Confidential 3,4 - - 3,4
Grand total 32,2 23,9 14,5 70,6
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MARKET WATCH NPL // Special Edition September 2017
HIGHLIGHTS
o Mixed deals are about to explode in 2017, due to the MPS deal closing expected in December
o The price of the MPS deal will be higher than previous deals in the same category and the buyer will be Atlante
o Unsecured deals show a price of 10%, higher than the trend and probably biased from the small sample analyzed
70,6 Bn€ of pipeline deals can be valued at around 14,4 Bn€ of market value.
Sources: Banca IFIS NPL Market Database - Press releases and news
Pipeline deal categories – Bn€
21,0% 10,0% 35,0% 11,0%Estimated avg pice %
Estimated Market value Bn€ 12,2 0,7 1,3 0,2
Estimated market value of 2017 pipeline is around 14,4 Bn€
57,9
6,93,8
2,0
Mixed Unsecured Secured Consumer
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MARKET WATCH NPL // Special Edition September 2017
2017 will be the year of large deals.
Sources: Banca IFIS NPL Market Database - Press releases and news
HIGHLIGHTS
o Big banks are dominating the portfolio offer
Top Sellers NPL transaction – Bn€
4,7
3,0
1,9
2,2
1,3
2,1
20,9
2,8
2,0
1,4
3,7
5,0
5,2
10,0
3,0
28,5
Nuova Banca Etruria; Nuova Banche Marche; Nuova CariChieti
Caricesena; Carim; Carismi
Banco BPM
Intesa Sanpaolo
Unipol
Veneto Banca
Banca Popolare di Vicenza
REV Gestione Crediti
Unicredit
Monte dei Paschi di Siena
2015 2016 2017 Pipeline
SERVICING MARKET
19
MARKET WATCH NPL // Special Edition September 2017
The acquisition of specialized servicing platforms is a key requirement for operating in the NPL market.
Sources: Banca IFIS NPL Market Database - Press releases and news
2015 2016 2017
# M&A Servicer
AuM Bn€
3
~16
7
~20
5
~19
Investors
20
MARKET WATCH NPL // Special Edition September 2017
Servicers acquired by international investors are focused on both secured and unsecured assets.
*The new corporate name is Aquileia Capital Servicer **The closing in progress // Sources: Banca IFIS NPL Market Database - Press releases and news; PwC
Servicer name SpecializationM&A Activity
Buyer Years Shareholder Type
CAF Unsecured/Secured/Corporate Lone Star 2015 Investor
Centaurus Credit Recovery Secured/Retail/Corporate Primus 2016 Investor
Credit Base International Unsecured/ Retail Kruk Group 2016 Investor
Credito Fondiario - Fonspa Secured/CorporateTages; Harvest
Investments 2013 Investor
Cross Factor Unsecured/ Retail Lindorff 2016 Investor
CS Union Unsecured/ Retail Axactor 2016 Investor
Finanziaria San Giacomo Unsecured/Secured/Retail/Corporate Cerved 2015 Investor
Gextra Unsecured/ Retail Lindorff 2017 Investor
Guber Unsecured/Secured/Corporate Varde 2017 Investor
Heta Asset Resolution Italia* Secured/Corporate Bain Capital Credit 2017 Investor
Non Performing Loans Spa Secured/Retail/Corporate K.Red 2016 Investor
Prelios** Secured/Corporate Davidson Kempner 2017 Investor
Recus Unsecured/ Retail Cerved 2014 Investor
Sistemia Unsecured/Secured/Retail KKR 2017 Investor
SPC Credit Management Unsecured/Secured/Retail/Corporate Dea Capital 2016 Investor
Tarida Unsecured/ Retail Cerved 2013 Investor
Trc Unsecured/ Retail Hoist Finance 2014 Investor
UCCMB Secured/Corporate Fortress 2015 Investor
Zenith Service Master Servicer Arrow Global Group 2016 Investor
21
MARKET WATCH NPL // Special Edition September 2017
A series of large non-captive servicers is active in Italian NPL market.
*Non-exhaustive list// Sources: Press releases and news; PwC
Servicer Name* Main Specialization AuM (~Bn€)
doBank Unsecured 77
Cerved Credit Management Unsecured 12
FBS Unsecured 8
CAF Secured 8
Guber Unsecured 7
Advancing Trade Unsecured 4
MBCredit Solutions Unsecured 4
Fire Unsecured 3
Prelios Secured 3
Officine CST Secured/Usecured 2
Cribis Credit Management Secured 1
AZ Holding Unsecured 1
Fides Unsecured 1
22
MARKET WATCH NPL // Special Edition September 2017
General statement
This publication is edited by Banca IFIS.
The information contained herein, obtained from sources believed to be reliable by Banca IFIS,
are not necessarily complete, and their accuracy cannot be guaranteed.
This publication is provided merely for purposes of illustration and information and
does not in any way represent financial and investment advice.