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CEE NPL markets on the peak? Strong dynamics with shifting focus

Date: 03/02/2018
Source: Deloitte
While non-performing loan portfolio disposals picked up in 2016 with just over EUR 7 billion face value of completed deals in the CEE region (based on publicly available deal information), the enhanced debt sales market activity continued in 2017, according to the sixth edition of Deloitte's report on non-performing bank loans (NPL).

The report analyses the evolution of key NPL metrics as well as the dynamics of loan portfolio markets. As a novelty this year’s issue is analyzing two additional countries, Ukraine and Bosnia & Herzegovina increasing the coverage of the study to 14 countries.

The most active CEE markets with the highest volumes of portfolios sold in recent years were Romania, Hungary, Croatia as well as Slovenia. Although corporate NPLs are still the most actively traded loan portfolios, some investors have already turned their interest towards residential mortgages.

Considering the twelve countries in the CEE region (excluding Ukraine and Bosnia & Herzegovina) covered by Deloitte’s report, the volume of non-performing loans saw a considerable decrease from EUR 51 billion in 2015 to EUR 44 billion in 2016. Together with Ukraine and Bosnia & Herzegovina the volume of NPLs amounted to EUR 61 billion in the CEE region as of end-2016. The Ukrainian banking sector is heavily impacted by non-performing loans accumulated during the economic and political crisis.


<“The improving macroeconomic conditions as well as the upsurge of real estate markets remained the main catalysts for non-performing loan sales in the CEE region in 2017. Regulators and local authorities in many geographies developed measures to urge financial institutions to dispose distressed as well as non-core assets. I expect yearly levels of NPL transactions in CEE to decrease in the next years, considering the fact that main countries in the region are reaching NPL levels that are closer to EU average. Although international investors are expected to start focusing on Mediterranean area (Greece, Cyprus, Italy) in the forthcoming years, those with CEE presence will continue to be very active in the region and will be looking to consolidate their positions locally as NPL stock is not “negligible” for them.>>

Changes related to taxation and the GDPR implementation are the main factors that will influence the Romanian NPL market in 2018.



Deloitte predicts that the sale of non-performing assets will remain the most common deleveraging option among banking industry players in the CEE region in 2018. However, with a number of corporate NPL transactions completed in the recent past, sale of residential mortgage portfolios is expected to increase in many countries. In the long run, the NPL activity in CEE is expected to gradually subside as incumbent banks will wind down their existing NPL volumes to a sustainable level. Deloitte also predicts that the activity of secondary NPL markets will increase in the forthcoming years. Besides this, market of performing bank loan (PL) transactions and banking entity deals are expected to pick up in alignment with the long-awaited consolidation of the fragmented CEE banking markets.

Deloitte is a leading advisory firm in loan portfolio transactional advisory globally, in Europe and in the CEE region. In the past years, Deloitte conducted deleveraging projects and bank loan portfolio transactions in the value exceeding EUR 500 billion globally, both on seller and buyer side. In the past four years, Deloitte advised its clients on deleveraging projects and loan portfolio transactions covering over EUR 6 billion of assets across the CEE region.

For Deloitte's annual benchmark study on non-performing bank loans please click here.


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About Deloitte in Romania
In Romania, the services are provided or supported by Deloitte Audit SRL, Deloitte Tax SRL, Deloitte Consultanta SRL, Deloitte Fiscal Representative SRL, Deloitte Tehnologie SRL, Deloitte GES Support Services SRL and Deloitte Shared Services SRL. Deloitte is one of the leading professional services organizations in Romania providing, in cooperation with Reff & Associates, services in audit, tax, legal, consulting, financial advisory, risk advisory, business processes and technology services and other related services with more than 1,100 professionals. Please see www.deloitte.com/ro/about to learn more about our global network of member firms.

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