The non-performing loans market is witnessing a dynamic growth. In 2013, the value of sold retail receivables was PLN 11.2 billion, in 2014 – PLN 14 billion, and according to estimates, the value for 2015 may reach even up to PLN 20 billion. The value of the Polish NPL market (both retail and corporate) is estimated at PLN 72 billion. Record sales values are caused mainly by the growing supply of bank retail and mortgage receivables. It is worth noting that in 2014 mortgage loan transactions were a novelty both for investors and for enforcement companies. Due to that, the prices evolved in an interesting way in the conditions of relatively comparable portfolios. They fluctuated from over 30% of the face value in transactions closed at the beginning of the year to only 15% in the last months of 2014.
The part of mortgage and institutional (corporate and SME) portfolios that is sold is constantly increasing. Our findings demonstrate that the sales in this area are moving from the portfolio format to the so-called Single Names or Special Situations, i.e. single corporate debts to large companies. The service often includes taking over and restructuring the enterprise or the debt, finding an investor or conducting (or participating in) bankruptcy proceedings. It also quite often involves the liquidation of assets, large investment, commercial or industrial properties. These are most often developers, shopping malls, hotels, industrial facilities, service complexes, office buildings, commercial properties and production plants. This means that the investors will be most often interested in single debts to the largest companies, which are often active, require restructuring or own property for liquidation, e.g. investment, industrial or commercial properties.
While the retail debt sector can be treated as relatively saturated – more than one third of the NPL portfolio (PLN 14 billion out of approx. 39 million) was put on sale in 2014, only PLN 2 billion out of the corporate debt portfolio worth even up to PLN 33 billion were sold. According to the sellers, the market suffers a serious deficit of competences with respect to business portfolio valuation and service, which results in reduced attractiveness and lower prices. For banks, this means difficulties in obtaining partners to conduct the largest, most complex transactions. With the growing specialisation and participation of foreign investors, accelerating loan activity and increasing capital requirements for financial institutions one may expect a systematic growth in this market sector, even up to 50 percent annually.
The development of the Polish market is confirmed by the inflow of foreign investors, which at the same time is a proof that the sector has achieved a high specialisation level. In 2014 we witnessed the acquisition of Ultimo by the Norwegian holding B2, the takeover of EGB by the French and Italian private equity Concordia 21. Swedish Hoist acquired Navi Lex, while the Czech APS Holding obtained foreign investors for new portfolios. The nearly two billion portfolio of Raiffeisen Polbank, worth PLN 300 million, was purchased by Getback (the Getin group).
The current interest of foreign investors is driven mainly by the inflow of capital from across the Atlantic and the weakness of Euro and local currencies compared to US dollar. The demand pressure of large international players focuses mainly on large volumes. Hence the growing number of one-off transactions with prices reaching several hundred million and a large offer of portfolios. Apart from that, increased supply results from:
- the consolidation trend in the banking sector,
- demanding requirements concerning the balance of financial institutions,
- search for funds to service the increasing loan activity,
- the changing structure of receivables offered.
The competition on the Polish market is large and highly specialised, so international players are forced to act in partnership with local enforcement agencies or to perform acquisitions. This is why their activity will rather foster further development and consolidation of the sector, which should be seen as an opportunity for reverse expansion with use of our know-how in synergy with the international experience of investors.