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B2Holding annual report: NPLs in Southeast Europe in 2017

Bulgaria continues to be among the most problematic countries in Europe in therms of  non-performing loans, according to the annual report of B2Holding, the owner of Debt Collection Agency (DCA). The country holds leading position in Central and Eastern Europe, where only Slovenia, Greece and Cyprus indicate higher levels of NPLs. The more we go down to the southeast, the less developed is the debt collection sector and therefore the higher the levels of NPLs.

In the SEE region there are large differences between the countries in terms of maturity and NPL levels. While the Romanian debt collection market is quite mature, with several large players like Kruk and Intrium present, in Bulgaria the sector is still in early stage. The further south we go, the less developed the business with secondary debt is, which also increases the chance for profitable deals with NPLs. In Greece and Cyprus, where B2Holding got a license to operate a bank loan recently, the levels of non-performing loans are the highest in Europe, and debt collection business – just emerging.

Romania and Bulgaria

The National Bank of Romania has been quite active in dealing with the NPL problem since the financial crisis, and NPL levels have been significantly reduced. However, the Romanian market for NPLs is still quite active, and both secured and unsecured portfolios are offered on a regular basis.

In Bulgaria, the NPL market is not as developed as in Romania, but it is still a quite active market and the NPL levels in percentage are significantly higher than in Romania. Following the European trend the NPL levels are decreasing here as well. While in 2016 the non-performing loans accounted for 12.5% of the whole local banking sector loan portfolio, late 2017 the share was already 10.2%. The decrease is largely due to several big NPL acquisition deals over the past year. Competition is increasing in Bulgaria, but is still not at the same level as in Romania, so the chance for profitable portfolio deals are higher.

Greece and Cyprus

In Greece, there are NPL volumes well above 100 billion EUR, and the relative levels are the highest in Europe. The market is still in the early stages, and portfolio sales have just started. Cyprus is also a market in its early stages, with relative NPL levels almost as high as Greece, and with NPL volumes in excess of 20 billion EUR. Sales of portfolios has just started, and is expected to pick up going forward as the Cyprus economy is recovering well.  The NPL markets in the Mediterranean countries are expected to emerge and attract more significant investor focus.

Read more in the June edition of DCA’s e-bulletin.