Originators main risks and vulnerabilities
After strong recoveries across sectors and asset classes in 2021, new emerging risks are impacting valuations in the market on the back of accelerating inflation and pricing of geopolitical tensions in Europe.
EU peripheral countries as well as Ireland were the most active portfolio transaction markets between 2020 and 2021.
Italy and Greece rank among the top markets by volume in 2021. In Ireland, the portfolio sale market has been very active due to top tier banks closing operations in the country.
The majority of NPE deals that have closed or are ongoing leverage securitization schemes with state guarantee.
The asset protection schemes in Italy and Greece have demonstrated the relevance and efficacy of the securitizations structures to address high NPL volumes in the different jurisdictions. In both countries, all top tier banks have leveraged these frameworks, which have been extended through to 2022. In 2021, traded GBV amounted to EUR37 billion in Greece and EUR12 billion in Italy.
The Irish market has been very active in recent years and 2021 continued this trend driven by KBC and Ulster Bank's decisions to exit the market. In 2021, KBC Ireland announced the sale of approximately EUR10 billion of loans, of which circa EUR1.4 billion were nonperforming. Ulster Bank's UK parent company, NatWest, opted to withdraw from the market on a more phased basis that could last until 2023.
There is an overall increase in activity and traction in the market with larger and more frequent deals, catching up with high investor appetite. 2021 saw a decrease in transaction volumes mainly due to COVID-19, but recovery in sales volumes has already been registered in 2022.
Limited activity in the market as the country already dealt with higher NPL volumes earlier in the economic cycle compared to the other EU countries. Recent investment opportunities have been mostly related to portfolios of shipping loans.
Very active NPL market mainly due to the deleveraging activity of the four largest Banks and the sale of their servicing platforms. Approximately EUR49 billion of loans are now fueling the secondary market of NPL sales on the back of the securitized business plans submitted under the Hercules Asset Protection Scheme (HAPS) that carries the Greek State guarantee.
The Irish market has been very active in recent years and 2021 continued this trend driven by KBC and Ulster Bank's decisions to exit the market. In 2021, KBC Ireland announced the sale of approximately EUR10 billion of loans, of which circa EUR1.4 billion were nonperforming. Ulster Bank's UK parent company, NatWest, opted to withdraw from the market on a more phased basis that could last until 2023. NatWest agreed the sale of EUR11.8 billion of Ulster Bank performing loans in 2021.
High market activities due to deleveraging volumes mainly from Intesa Sanpaolo, UniCredit and BPER. The largest transactions continue to leverage the GACS scheme and deals volume are expected to remain high through 2022 with additional portion of UTP transactions compared to the past.
Market volumes started to recover in 4Q21 and are projected to continue to improve until 2022 year-end. In 2021 the activity was pulverized among small trades from several sellers (the trend in 2022 is similar). Looking forward to 2023 and beyond, the pressure on credit quality associated with the new interest rate environment (repricing will be mostly concentrated in 2H22 and 1Q23) and the projected economic slowdown, coupled with the regulatory pressure will continue to drive the NPL market in Portugal. The increased leverage costs for NPL investors will also play a role, particularly in larger transactions.
The Spanish market has shown great activity and relevant size of opportunities, allowing new investors to position in the market alongside other consolidated investors. Spain will continue to deliver opportunities on a wide range of asset types, from non-performing loans and real estate assets to reperforming and performing loans, including more specialized opportunities. Therefore, we will continue to see a large volume of assets being sold of a higher quality.
NPL deleveraging activities are expected to grow in 2022 following the upward trend of recent years.