Insights - What we think archive

What you missed at NPL Italy 2021: the UTP panel

By David Campion, Head of Servicing (Italy)

Italy’s €55bn unlikely-to-pay (UTP) stock is expected to rise to €60bn in 2021

...and as high as €72bn in 2022.

SmithNovak’s NPL Italy is one of the most popular events for professionals in the Italian NPL market.

The fourth edition took place in late May, welcoming over 300 experts who are actively buying, selling, servicing and advising within the industry – including our dedicated local team that provides end-to-end services for our clients across their loan lifecycle.

With non-performing exposures (NPE) rising due to COVID-19, the UTP panel discussion covered everything you need to know from trends amongst banks and the new Credit Funds structure to questions around non-bank secondary lenders.

How are banks preparing to address NPEs after the moratoria? What trends are emerging?

Until now, the Italian UTP space has been dominated by medium-large loans and portfolios. But SMEs, the largest part of the economic framework, are now suffering from the shock of the pandemic – especially retail.

Banks have managed larger UTP portfolio sales in the past, but it’s now expected that the UTP space will consist mainly of smaller loans and more granular credits.

For banks, UTP borrowers are ‘live’ clients so they prefer to maintain a relationship and ultimately lead them back to bonis. The Bank of Italy’s moratoria on loan defaults and reclassification hides the impact of COVID-19, but it will soon emerge when these measures are withdrawn at the end of 2021.

KPMG expects UTP stock to increase by €20-50 billion in the next 18 months. This highlights the need for the human factor – including interaction with borrowers to negotiate and finalise agreements.

Servicers need to invest in IT platforms for:

  • Cost-efficiency
  • Automation
  • Industrialisation of financial analysis, portfolio segmentation clustering (WO activity) and legal papers

Is the new acquisition structure, ‘Credit Funds’, a good thing?

Banks can achieve their main goal of deleveraging bad credits through different routes:

  1. Securitisation
  2. Sales of Loans
  3. Transfer of Receivables
  4. Credit Funds

The market has opened up to allow a new structure to manage the NPE deleveraging, known as ‘Credit Funds’. Banks work with servicing partners to deleverage while retaining interest in the loans through securitisation.

The structure is becoming more sophisticated. To manage a credit fund properly, you need:

  • Specific expertise – including a management team and real estate experience
  • Capacity to issue new finance to support borrowers, develop the structure and balance risk and return
  • Aligned interests between sponsors, contributors and servicers

BCMGlobal has experience helping European banks deleverage through direct bank outsourcing or complete servicing for distressed debt.

We see Credit Funds as an important way for banks to manage their NPE portfolios. The State Guarantee ‘GACS’ solution only caters for NPLs, so we expect to see more Credit Funds specialised in UTPs in the near future. This will offer a valid alternative solution to help banks with their deleveraging plans.

Where are the non-bank secondary lenders in the Italian market?

Italy has historical limits to alternative lending, but this is improving – such as new finance and lending within Credit Funds.

The volumes of non-banking entities lending to borrowers are lower than the EU average because Italian corporates are smaller in scale. It’s not considered an easy market due to its complex bankruptcy law and the difficulty in aligning stakeholders’ interests with competing deals.

This is also changing as SPVs can now lend to borrowers, but there remains the fronting bank issue: you need a banking license S.106 to lend money. A servicer needs this or to involve a fronting bank in the transaction.

BCMGlobal works with many non-bank lenders across Europe to help them enter new markets for residential and SMEs. Servicers will be central in the growth of this sector in the Italian market.

We regularly support banks and investors with new lending activities, helping customers return to in-bonis or to restructure existing loans through to resolution.

What can servicers do to help?

Servicers will need to be specialised and equipped to deal with this sector. Their challenges will be around technology and automation, and the ability to facilitate new lending and alternative sources of funds.

Servicers also need to be aligned to banks and their goals to return borrowers back to bonis. 

BCMGlobal has the experience and skills that banks and clients require: the capacity to issue new finance and a skilled team of experts.

Get in touch to find out how we can help.


David Campion

Head of Servicing (Italy)

Tel: +39 340 4581 367

Email: David Campion