With loan portfolio sales increasingly recognised as an effective method of deleveraging, this continues to be a crucial element in banks’ strategies.
In this context, the non-performing loans market (“NPLs”) in the region has gained momentum in 2015 and Romania is among the regional champions of the CEE region with estimated sales (including transactions ongoing at the end of the year) of 2.5 billion EUR last year, according to Deloitte’s Deleveraging Europe 2015-2016 Survey.
“If we compare the availability of the NPLs transacted in Romania in the last couple of years with the rest of the CEE, we can definitely say that Romania counts among the most active countries in the region,” said Radu Dumitrescu, Director Financial Advisory Services Deloitte Romania.
According to the Survey, a number of transactions initiated in late 2015 remain ongoing and will be a key driver for 2016 market trend.
“Romania has all the chances to reach a similar figure as in 2014 and 2015 but for that we need a large value transaction to be finalized also this year,” Dumitrescu added.
“The active Romanian NPL market environment is also reflected by the development of the legal documentation used in such transactions. While it might be premature to speak at this stage about an actual <market standard> in terms of portfolio transfer agreements, the lawyers and financial advisors who worked on multiple NPL deals have developed informally a set of <best practices>. Notably, this is common also for other jurisdictions, where NPL portfolio transfer agreements tend to be more bespoke contracts, drafted and negotiated in accordance with the specifics of each deal, yet considering local and international best practices. This may be slightly different (but not always) in individual NPL transfers (single large exposures), where the standard documents developed by the Loan Markets Association (LMA) may be a suitable contractual form as a starting point,” said Andrei Burz-Pinzaru, Partner in Reff & Associates, law firm member of Deloitte Legal network.
Deloitte’s Deleveraging Europe 2015-2016 Survey shows that the most active buyers in the CEE region were Deutsche Bank, Kredyt Inkaso, Kruk and APS. Amongst the top active sellers we can note Banca Comerciala Romana (BCR), Unicredit Tiriac Bank (Romania) and Piraeus Bank Romania.
• Romania remains the most active market in the CEE region and is expected to continue to remain active in 2016
• At CEE level, completed deals in 2015 remained in line with 2014 levels
• A number of transactions initiated in late 2015 in the CEE remain ongoing and will be a key driver for 2016 market trend
• Failed deals are not helping the market develop and investors retain a healthy skepticism regarding the likelihood of deals completing
• Establishing a servicing platform for secured portfolios is a key concern for many international investors
• Regional investors are working to build relationships with international investors who lack the experience to operate in the region but have the capital to purchase the larger portfolios which are coming to market
• Changes in regulatory policies and additional write-offs relating to the latest round of AQR exercises had led to the narrowing of the pricing gap between buyers and sellers of NPLs
• Slovenia and Croatia will likely see substantial increase in deal activity in 2016
For full access to the report, please see here.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see the Deloitte website for a more detailed description of DTTL and its member firms.
Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225,000 professionals are committed to making an impact that matters.
Reff & Associates SCA is a law firm member of Bucharest Bar, independent in accordance with the Bar rules and represents Deloitte Legal in Romania. Deloitte Legal means the legal practices of Deloitte Touche Tohmatsu Limited member firms or their affiliates that provide legal services. Visit the global Deloitte Legal website to see which services Deloitte Legal offers in a particular country.