Financial Services Ireland


Opportunity Out of Investment: Investing in the Greek NPL Market

Read more

The recent liberalisation of the economy has  facilitated Greece’s return to growth. Combined with the Greek  Government’s commitment to EU membership, EY believe this has created an appealing market for international investment in the Greek NPL market.

Despite improvements, Greek banks’ ratios of bad loans remained  in excess of 45% in 2017 — the highest in Europe. The four systemic banks had combined non-performing exposures (NPEs) of €105b as at 30 September 2017 and must reduce this amount  by €43b by 2019, in line with Bank of Greece targets. The scale of  these reductions necessitates that loan sales will be a significant part of the solution. A significant increase in  the supply of portfolios coming to market is therefore expected.  As the underlying quality of Greek loan portfolios has improved in line with the real economy, they have become increasingly attractive to investors. The gradual improvement in macro-economic conditions has already resulted in very significant  investor demand in the first loan sales. We expect such demand to  only increase as more portfolios come to market.

This is not to suggest that Greece does not face its own challenges — legal and regulatory hurdles do still exist. However, the Greek Government has consistently re-affirmed its commitment to remain within the single currency and consequently, to accept the reform program.

The below EY report sets out the opportunities and challenges of investing in the Greek NPL market. In particular, it provides an overview of the economic and political context before outlining  the current evolution of Greek NPLs. It then considers the regulatory and legal hurdles, as well as a specific look at the servicing landscape.

Finally, you will find a review of the emergent NPL market in Cyprus. The value of Cypriot NPLs is much smaller than those in Greece,  with combined NPEs in the three largest banks of €18b. However,  improvements in the regulatory landscape and challenging NPE ratios make transactions likely.

Click below to read the full report, and please don’t hesitate to reach out should you wish to discuss.

Alan O’Brien

Head of Strategy and Transactions
Alan's Full Profile