Romania’s BCR bank sells €370mn NPL bundle to debt specialist B2Holding

Romania’s BCR bank sells €370mn NPL bundle to debt specialist B2Holding
By bne IntelliNews September 9, 2016

B2Holding of Norway, via its fully owned subsidiary Ultimo Netherlands, announced in a September 8 press release that it has entered into an agreement to acquire a residential mortgage Non-Performing Loan (NPL) portfolio from Romania's largest lender BCR in a 50/50 partnership with German EOS Investment RO. The portfolio has a nominal value of around €370mn and consists of 6,800 loans secured by real estate collateral.

The bank managed to reduce its NPL ratio to 14% at the end of June from 23.1% at end-June 2015, thanks to recoveries, sales of selected NPL portfolios and write-offs.

The transaction with B2Holding and EOS is expected to close in December.

The net profit of BCR, controlled by Austrian group Erste, rose 5.4% to RON636mn (€141.5mn) in the first half of the year, the bank announced on August 5. The increase was supported by operating performance and continued improvement of portfolio quality, BCR said.

After the fall in BCR’s NPL ratio, Moody’s changed the outlook for BCR's deposits from stable to positive and affirmed the bank's long-term Ba1 deposit ratings and Baa3(cr) Counterparty Risk Assessment (CRA).

The upgrade of BCR's BCA to b2 from b3 reflects ongoing improvements in the bank's asset quality, profitability, capital adequacy and funding structure, Moody's explained. The fall in the bank's NPL ratio from a high of 25.7% at end-2014 was due to the sale and write-off of problem loans, restructuring procedures and increased recoveries as economic conditions improved.

Romanian media reported in July that BCR had completed the sale of a €1.1bn NPL bundle to a consortium formed by Deutsche Bank, International Financial Corporation (IFC) and APS. Dubbed "Project Tokyo", this was the biggest NPL bundle sold in Romania. The discount was around 90%, claimed at that time. The bank’s NPL ratio decreased by 5pp following the deal.

Country-wide, the NPL ratio calculated under EBA methodology plunged by 1.1pp in June, reaching 11.3% at the end of H1 (4.9% down y/y). This visibly helped the banking system’s performance. Romanian banks achieved an aggregated profit of RON2.35bn (€522mn) in H1, 96% up y/y. Profits were €264mn in Q2, according to bne IntelliNews calculations based on central bank data. This was the sixth quarter in a row of robust profits, achieved amid constant improvement in credit quality.

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