Bulgarian NPL market to stay active with focus on corporate, SME secured segment

Georgios Christoforou, regional director for SEE and CEO of B2Kapital SA-Greece, a subsidiary of B2Holding

Norway-based B2Holding is one of the largest debt solution providers in Europe with operations in twenty-three European countries. The group has offices in three additional countries: Austria, Luxembourg and Netherlands. Subsidiaries in SEE are the leading player of debt purchase and debt collection, including Debt Collection Agency in Bulgaria; B2Kapital Portfolio Management and Debt Collection Agency in Romania; B2Kapital Greece and B2Kapital Cyprus.

What are your expectations regarding the value of NPL transactions on the market in SEE in 2019 and over the next few years?

In our view the SEE region will be very active regarding NPL transactions. It is not easy to predict the value, as the banks are revising their deleveraging levels and targets every year. In Bulgaria we expect the market to remain active with a focus on the corporate and SME secured segment as well as bigger retail unsecured portfolios from the top seven banks. We estimate that the NPL deals in 2019 will be for around 1.3 – 1.5 billion euro in nominal value, exceeding the levels of the record-breaking 2018; in Romania the market is not very active, but the political developments may give a new boost to the transaction pipeline. In Greece and Cyprus we have more clarity, because the targets are made public by the European Stability Mechanism’s agreement with the banks. In Greece we expect around 20-25 billion euro to transact by 2021 and a good part this year. In Cyprus we also expect around 10 billion euro to be put for sale. Already, this year one transaction in Cyprus refers to a portfolio of 5.7 billion euro and a purchase price of 1.4 billion euro.

How do you see NPL levels in SEE going forward?

Overall, the NPL levels are in a downward trend and if the macroeconomic and political environment remains stable, then we should see the levels declining. However, there are some exceptions. For instance, the legislative endeavours in Romania – which in our view were not in the right direction – have already led to an increase of NPLs. Whether this trend will be temporary or not, we need to wait and see. Otherwise, overall the trend should be a declining one.\

How does the ongoing consolidation of the SEE banking sector affect your operations?

The ongoing consolidation is in general a step to the right direction as it leads to the creation of more sustainable banks. And banking system stability is a pivotal pillar to the sustainability of countries and regional economies. This consolidation is often coupled with a higher appetite by vendors to clean up their books. Therefore, it is a trend that is benefiting our operations rather than not.

Will the efforts of Bulgaria, Romania and Croatia to join the Eurozone and the Banking Union affect the local NPL market?

This is too technical a question to answer, but seeing the experiences of other small economies, the transition to euro often led to an increase of NPLs. This may be particularly applicable, depending on which currencies the debtors have borrowed money from the Banks. As I said it is difficult for us to answer this, as we lack the information of what hedging measures the borrowers have undertaken on their exposures.