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South East Europe contributes significantly for the growth of B2Holding

South East Europe (SEE) is among the regions that contributes most for the growth of B2Holding, the owner of the Debt Collection Agency (DCA), according to the results for the third quarter of  2018, presented by the Norwegian holding.

SEE, which includes Bulgaria, Romania, Cyprus and Greece, is giving almost 20% of B2Holding’s revenue, reaching EUR 41.45 million in the first nine months of the year, or 174% growth over the same period last year. The region’s operating profit (EBIT) for the nine months is EUR 26.4 million, an increase of 122% on an annual basis (see the chart below). B2Holding’s results show an increasing stake of SEE for the group. In comparison, in the first nine months of the year, Western Europe generated 12% of B2Holding’s revenue. Overall, the indebtedness of the East is much lower than the West, measured by terms of GDP.

B2Holding sets several goals for next years in SEE. Supporting the investments in non-performing loans portfolios, there will be an increase in purchased debt due to badly secured corporate loans – for small and medium-sized enterprises, large companies and others. Subsidiaries of the holding, including DCA, will continue to focus on buying large portfolios, aiming to diversify risks and increasing their investment opportunities. Group companies in the region aim to improve the service of all kinds of unsecured and secured portfolios. Best practices and experience will be shared between B2Holding’s divisions across countries for more efficiency. The process will be helped by cross-border initiatives. The Norwegian holding reports an increase in the transactions realized through forward flow deals (FFD).

[infogram id=”south-east-europe-1h984wl1xjlz6p3?live”]

This year 29% of the uncollected acquisition assets were generated through this type of agreements. Last year the share was 23%, and in 2016 it held 16% of the deals. The ambition of B2Holding is FFD to bring 50-70% of the total volume of deals. The company points out several advantages of the FFD – quick sale of bad loans with minimum costs, which benefits both sellers and buyers. In the last quarter of this year B2Holding expects to acquire secured loans with a nominal value of EUR 78.8 million and unsecured loans amounted at EUR 78.7 million. In the last three months of the year B2Holding expects to acquire EUR 12.2 million of secured and equally in unsecured loans in the SEE region. According to the holding’s forecasts, by September 2019, the nominal value of the secured loans in the holding’s NPL portfolio will reach EUR 269 billion and the value of the unsecured ones – EUR 300 billion. Overall, the level of unsecured loans varies slightly between quarters, but there is also seasonality. Secured non-performing loans fluctuates quarter by quarter.

Bad loans of the European banks are valued at a total of  EUR 780 billion as 65% of them are in four countries – Italy, France, Spain and Greece. In Italy they are valued at EUR 159 billion, and in Spain – almost  EUR 100 billion. Measured against all loans the situation in Greece is the most unfavorable – 45% of the loans are non-performing, as is the case in Cyprus – 34%. Despite the high value in Italy the share of overdue loans there is 10% of all, and in France is only 3%, according to data in June 2018.  At the same time all of the EU countries report an economic growth and are expected to continue next year. For 2019 the highest GDP growth is expected in Cyprus (4.2%), Poland, Serbia, Bosnia and Herzegovina – are expected to grow by 3.5% year-on-year.

At the same time unemployment is projected to fall in all countries compared to 2017, with the exception of Czech Republic and Estonia. For Czech Republic there are expectations for unemployment rate to rise by 0.1 percentage points and in Estonia – by 1.1. In the other countries the decrease will be between 0.1 percentage points in Romania to 3.4 points in Greece. For Bulgaria unemployment is expected to fall by another 0.7 percentage points, and GDP will grow by 3.1% in 2019. Private sector indebtedness remains high in Europe, particularly in Western Europe, where debt is traditionally higher than in Central Europe (CE) and South Eastern Europe (SEE). There is a tendency for consumer lending to increase in CE and SEE, predicts B2Holding.

In Bulgaria the share of the private debt is 100.1% of GDP at the end of last year, while for Romania it is just over 50%. Both countries are in better shape looking at this indicator than Greece, where private sector debt is 116.4% of GDP, while in Serbia it is only 73%. Similarly to Bulgaria the situation in Croatia is almost 100%, while in Hungary it is only 71.4%. For comparison, in France, Italy, Spain and Portugal private debt to GDP exceeds 100% and in Sweden and Denmark around 200%. The highest is in Norway (285%) and Cyprus (316%).