“This maturity is due to Romania having the edge on other countries in the region in terms of sales of portfolios of non-performing loans”, explained Radu Dumitrescu, transaction support services partner within Deloitte Romania.
Pondering in the 12 CEE countries (except Ukraine and a Bosnia-Herzegovina) included in Deloitte report, the NPL volume fell significantly, from EUR51 billion in 2015 to EUR44 billion in 2016. Including Ukraine and Bosnia-Herzegovina, the NPL volume reached EUR61 billion in the region, at the end of 2016. Ukraine’s banking sector is strongly impacted by NPLs amassed during the political-economic crisis.
Sales of NPL portfolios will be impacted this year by taxation changes and by the implementation of a program regarding the General Data Protection Regulation (GDPR), as per a Deloitte analysis.
“In the first half of 2018, we will mostly likely see a low level of transactions because most sellers might put transactions on hold until the clarification of the legislative situation. However, I expect sales of NPL portfolios to be resumed in the second half of 2018,“ said Dumitrescu.
Dumitrescu also said another aspect worth being considered in upcoming years is the development of the secondary NPL sale market and the transactions with “significant exposures”. Deloitte also expects the secondary NPL activity to grow in upcoming years.
Deloitte expects NPL sales to become 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. On the long term, the NPL activity in CEE is expected to shrink as existing banks will be reducing NPL volumes on a sustainable level.
Deloitte also expects the performing loan market and banking transactions will align along with the much-anticipated consolidation of banking markets in the region.