Non-performing loans in Central and Southeast Europe fell 6.5% y/y in 2015

By bne IntelliNews October 26, 2016

Levels of non-performing loans (NPLs) in Central and Southeast Europe (CE/SEE) continued to decline in 2015 but still remain worryingly high, reported the Vienna Initiative of cross-border banks in Emerging Europe.

As of December 2015, NPLs amounted to €55.5bn, a fall of 6.5% (or €3.9bn) on December 2014 levels. This figure represents 5.1% of GDP in the region, and 7.7% of gross loans. In December 2014 the NPL/gross loans ratio was 8.4%.

Nevertheless NPL ratios exceeded 10% in 10 of the 18 CE/SEE countries, with highs of 21.6% in Serbia, 20.6% in Bulgaria, 18.2% in Albania and 16.3% in Croatia.

All countries with the exception of Romania (+1.4% y/y), the Czech Republic (+1.7% y/y), Macedonia (+4.7% y/y) and Bulgaria (+20% y/y) showed a fall in NPL volumes.

In terms of NPL/gross loans ratios, all countries with the exception of Latvia (up 0.04 percentage point), Serbia (+0.1pp) and Bulgaria (+3.9pp) showed a fall.

Across the region the NPL coverage ratio (measured as the proportion of loan loss provisions to NPLs) increased from 59.4% in December 2014 to 60.9% in December 2015, an increase of 1.5pp y/y.

The most vulnerable countries in terms of higher NPL ratios and lower NPL coverage ratios than the average were Bulgaria, Montenegro and Romania. In Bulgaria NPL volumes rose by 20% to €5.7bn, the ratio to gross loans rose 3.99pp to 20.6%, and the coverage ratio fell 0.7pp to 48.8%.

The reduction in NPL volume across the region was primarily attributable to decreased NPL stock in Hungary (€2.6bn, -33.5% y/y), Slovenia (€0.9bn, -22.1% y/y) and Albania (€0.2bn, -19.6% y/y). In Hungary and Slovenia this was a result of sales of NPLs, while in Albania banks were forced to write off loans of more than three years in the lost category.

Over the last 18 months, approximately €6bn in NPL transactions have been realised in the CE/SEE region, with Romania, Poland and Slovenia accounting for over 75% of the total sale value.

In 2015 €4bn of sales were realised, representing 7.2% of NPL stock as at December 2015. There was a huge surge of transactions in the second half of the year in Romania – making up three-quarters of that period’s sales – which was driven by recent write-offs.

In the first half of 2016 sales were down 15.5% on the second half of 2015, but up 30.1% y/y. Romania, Poland, Slovenia and Hungary accounted for 29%, 21% and 19% of the total transaction value respectively.

In the second half of this year there have been already six realised transactions, the Vienna Initiative reported, three of which were in Romania.





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