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Greece, meanwhile, is searching for a systemic solution to the mountain of bad loans still on its banks balance sheets

Olga Galazoula, partner in restructuring and special situations, talks about the outlook for sellers and investors in the global NPL market.


Over the past 12 months, we have assisted clients pursuing NPL transactions in the UK, Ireland, Spain, Portugal, Italy, Germany, Greece, Cyprus and China. Indeed, the supply and demand for non-performing assets across the globe shows no signs of abating. We believe that 2019 will continue to be similarly active regardless of whether a European, or even global, recession ensues.

2018 was another very busy year for the Ashurst global NPL practice. Our clients, ranging from sell-side banks to distressed investors, servicers and debt-on-debt providers, have taken on new challenges in both mature and emerging jurisdictions, participated in market-formative transactions and pushed the boundaries of NPL transaction structures.

Building on the success of our earlier Greek NPL Report and following our clients quest for the “next big thing” in the NPL markets, this year we wanted to go global, aiming to better understand where the future pipeline will come from and where the investment preferences of our buy-side clients currently lie.

Debtwire and Ashurst sought and received input from 103 senior-level executives about their experiences and their outlook for various established and emerging NPL markets.

The research sample includes financial institutions (in their capacity as sellers), NPL servicers, buy-side investors and professional financial and legal advisors from across EMEA, Asia-Pacific and the Americas. All participants confirmed that they were actively involved in NPL transactions. The research was based on a combination of qualitative and quantitative questions with 100 interviews conducted over the telephone by appointment and three conducted via an online survey. Statistical results were collated and analysed by Debtwire and specialists within Ashurst, with all responses anonymised and presented in aggregate.

Given the wide remit, this report is not intended to be exhaustive with regard to each individual jurisdiction or geography, but rather focuses on the key features and prospects of each one and gives a direction of travel as to where NPL activity may migrate.

Our sincere thanks go to the 103 participants who contributed so willingly to this research, our Ashurst partners and colleagues across the globe who provided valuable input and insights to this report, Gopika Pant, Vineet Gupta and Anandini Rathore of Indian Law Partners for their contribution to the section on India, and of course Debtwire.

We hope that the report makes for interesting reading and look forward to speaking to you about the findings of this report in more detail.

Market Snapshot

It was another record year for the European NPL . Over €205bn in completed NPL sales were tracked by Debtwire during the period and over €45bn were in the pipeline at the end of .

The European market is clearly changing, but will remain active for several years to come. The flow of NPL trades has been moving steadily from Northern Europe to the South over the past few years, and the Mediterranean countries are now at the heart of the action.

In Italy, the Garanzia sulla Cartolarizzazione delle Sofferenze (GACS) scheme, which was devised to help banks offload bad loans, is set to expire in and its renewal remains uncertain. Banks in the region are now focusing on the disposal of the large amount of Unlikely To Pay (UTP) loans that remain on their books.

In Spain, after a new series of significant deals, large banks are in the advanced stages of cleaning up their balance sheets. Some are now turning to retail residential mortgages, involving potentially challenging political scenarios.

Despite all this activity, 2018 may have been the peak year for NPL sales in Europe. Investors are already seeking new opportunities, both in terms of types of asset on the market as well as geographies. China and India are both clearly on their radar.

The Chinese market has been the talk of the NPL town for years, and International investors including Bain Capital Credit, the Blackstone Group and Oaktree Capital Management have already bought sizeable portfolios in China. But the deals are on the order of several hundred million dollars, rather than the billions seen in Europe.

Average non-performing loan ratios for Chinese commercial banks stood at 1.9% at the end of 2018, up from 1.74% a year earlier, according to data released by the China Banking and Insurance Regulatory Commission (CBIRC). While this may appear to be a relatively low NPL ratio, it represents a ten-year high in China, where “lending at risk of becoming non-performing” also rose to 3.4 trillion yuan by the end of .

Bad loans held by Indias banks, meanwhile, stood at trillion rupees (US$ billion) at the Michigan title loans end of , according to a statement by then-Finance Minister Piyush Goyal in Parliament.

With a looming recession and debts at record high levels, the time is ripe for investors to consider these new geographies and asset classes for the opportunities they offer in the distressed debt market.