The completion, albeit delayed, of planned securitizations and at the same time, continued restructuring of NPEs through the “Split & Settle” program are the two key parts of the strategy being implemented by the management of National Bank of Greece (NBG), in an attempt to protect its portfolio from the impact of the coronavirus as much as possible.
As previously reported by NPL Confidential, NBG’s agreement with Bain Capital on the Icon project is a matter of time in a development that will significantly restore the portfolio of denounced loans from medium, small, and very small-sized businesses, or those in deep arrears. The portfolio for sale (project Icon) includes 7,300 denounced loans (83 percent of the total) or in deep arrears from 1,500 medium, small, and very small-sized businesses. The loan outstanding amounts to 1.5 billion euros and the bank’s total amount due (including interest, penalties, etc) is 2.5 billion euros.
At the same time, NBG is proceeding normally with the securitization of NPLs over 6 billion euros (project Frontier) to tap the market when conditions normalize. The specific securitization was to begin in the second quarter of this year, however, it goes without saying that the schedule is directly related to conditions set by the coronavirus with the bank informing analysts that the securitization will begin when turmoil eases.
55% increase in loans restructured
At the same time, the volume of secured non-performing loans being restructured with the new Split & Settle program increased by 55 percent in 2019, while the messages from the number of borrowers who settled them their loan were encouraging as they abandoned the protection of the Katseli law.
In particular, the number of loans settled through Split & Settle in the final quarter of last year rose to 326 million euros from 214 million euros in the first quarter. The progressive increase of loans restructured in the second half of the year made a decisive contribution to achieving the bank’s informal 1 billion euro target for loan settlements. This year’s goal was set at the same time amount but this will be reviewed when the pandemic is handled and restrictive measures are eased.
The advantages of arrangements through the Split & Settle program spearhead National Bank’s effort to persuade its customers to give up home protection provided by the Katselis law. Last year, borrowers with unpaid loan balances of 203 million euros gave up the protection and settled their debts. On the other hand, however, 3,440 of NBG’s customers rushed, during the first quarter of last year, to seek protection under the law shortly before it expired.
In regards to NBG’s overall strategy in managing bad loans, its NPEs fell in 2019 by 4.7 billion euros on an annual basis. The overall reduction in NPEs since the start of 2016 amounts to about 11 billion euros, with the rest held by the bank amounting to 10.6 billion euros at the end of 2019. If conditions allow for the current securitization plan to be completed, NPEs will fall from 10.6 billion euros in late 2019 to very low levels.