By Alessandro Di Martino, Senior Manager – Business Development and Advisory (Italy)
New market reports in Italy predict that NPEs (non-performing exposures) will rise to 389bn in 2021.
This includes trades of around 40bn in NPLs (non-performing loans) and another 12bn in UTPs (unlikely-to-pays). In 2022, it’s estimated that overall figure will rise to 441bn.
The next two years are set to be busy for the Italian market, especially for our dedicated local team that provides end-to-end services for our clients across their full loan lifecycle.
NPL Italy 2021
On 20 may 2021, we attended SmithNovak’s virtual NPL Italy event as a Servicing Partner sponsor. Our experts were joined by over 300 guests who specialise in buying, servicing and advising the Italian NPL market.
The event welcomed panellists across a range of hot topics, including servicing, securitization, buying and selling NPLs, technology and a focus on UTPs.
Our own Alessandro Di Martino was invited to bring his expertise to the servicing panel. Here’s what we learned.
What key challenges have servicers faced since March 2020?
A key challenge has been social distancing due to COVID-19 restrictions. This removed physical borrower meetings, making it more difficult to secure extra-judicial settlements – while court closures increased delays in collections. This also included restrictions on real estate site visits.
At BCMGlobal, we adapted and evolved to continue our high performance for clients. We immediately switched to remote working for over 1,000 employees across Europe and repositioned our sales and marketing campaigns to excel online and for clients to access. For example, we delivered virtual tours for interested buyers of assets.
How will the market move forward?
The panel predicted that NPL volumes will increase as government support will be reduced. This creates pressure for banks to start trading portfolios again due to NPL ratios, so they can manage NPE stock and calendar provisioning.
Banks will use all existing and new channels including loans disposal, UTP funds, bank outsourcing and securitizations with or without GACS and other solutions.
SPV loan owners will perform more sales on the secondary market while virtual open houses will increase for selling assets. The panel expected that there will soon be a public software or platform for judicial procedures to interact with receivers.
What factors are key to improved servicing efficiency and performance?
There are a number of factors:
- A workout model is crucial to foster managerial profiles, allocate efficient loan managers and manage external providers
- Investment in human capital, including retention policies and training courses
- Flexibility to deploy and reposition resources
- IT tools
A main challenge remains: fees competition versus headcount allocation.
What innovations are we seeing in servicing?
Investors recognise that they can’t rely solely on workout and judicial processes; they must also consider asset repossession and value-add activities to extract maximum value.
This means servicers are becoming less one-dimensional. For example, BCMGlobal has heavily invested in our platforms for real estate management and REOCO.
Alongside technology, the best resolutions come from proactivity and direct engagement with portfolios, borrowers and stakeholders plus innovations, IT systems and human interaction.
BCMGlobal continues to invest in systems and software to ensure our clients receive the best possible service regardless of market challenges.
Get in touch to find out more.