Evolution of European Banks' NPLs and NPL Securitisations Amid COVID-19
The European nonperforming loan (NPL) securitisation market continued to support the divestment of NPLs from banks and offered access to distressed investments for investors in 2020. Despite the Coronavirus Disease (COVID-19) lockdowns, there was a considerable supply of public and private NPL transactions from multiple jurisdictions over 2020. In this commentary, we focus on how the markets in the key European NPL securitisation jurisdictions (Italy, Greece, Spain, Portugal, Ireland, and Cyprus) developed in the last 18 months and, among other things, we discuss:-- The evolution of key metrics, levels of NPL, loans under moratoria, and the role of securitisation, as well as direct sales in reducing the NPL stock;
-- The analysis of the evolution of publicly rated NPL-backed bond issuance; and
-- Recent NPL securitisation transactions in 2020/2021 and emerging trends.
“The comprehensive response of the European governments have so far been effective in preventing an increase in NPLs in the short term. As the moratoria and public guarantee schemes expire and other measures reverse, we expect NPLs to increase but the deterioration will depend on various factors, including the country's economic recovery.” said Sinem Erol-Aziz, Vice President, European NPL.
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