February 9, 2022 10:45 am

NPL outlook Part II: Greece and Spain could see €43 billion in new NPEs in 2022

Greece and Spain could see €43 billion in new non-performing exposures (NPEs) in 2022, according to a forecast by doValue, the Southern European loan servicing specialist. The forecasts, based on PwC analysis, systemic banks’ annual reports, and EBA Q3 2021 data, imply €116 billion in new and existing NPLs in Greece and Spain over the coming three years. In the second part of this NPL outlook, we focus on Greece, Iberia, Germany and Austria, and the UK.


More than €24 billion in new and existing NPE exposures are expected to emerge over the broad Hellenic region in the coming three years, according to doValue forecasts. This forecast includes €14 billion in new NPEs over the three-year period, including €5 billion in 2022 and 2023 and €4 billion in 2024. Actual transactional activity will be mediated by default rates, the evolution of the pandemic and economic growth as well as investor demand and industry-specific variables. 

Currently, there are at least three live deals. The largest is PQH’s €5.2 billion Project Ariadne, consisting of business, consumer, and mortgage loans, predominantly secured by real estate, according to a separate report. In addition, there is a €2 billion non-performing sale and leaseback real estate portfolio, sponsored by Greece’s Ministry of Finance, and National Bank’s €1.5 billion Frontier II, a HAPS securitisation, according to doValue data.

Overall, the systemic four Greek banks– Eurobank, National Bank of Greece, Alpha Bank, and Piraeus Bank – remain on track to achieve an NPL ratio below 10% by the end of 2022. The four banks represent approximately 80% of the Greek commercial lending market. The outlook for GDP in Greece is forecast to grow by 5% in 2022, according to the Bank of Greece. The favourable outlook, together with the extension of the Hercules Asset Protection Scheme (HAPS), should support continued systemic bank asset quality improvements and deleveraging. If Greece’s systemic banks achieve stated NPL targets in 2022, this would leave a residual NPL stockpile in the region of €16 to €18 billion – down from a peak of €86.3 billion in March 2016. Future NPL sales will emerge after a short lag effect from last year’s expiry of the moratoria on loan repayments. The proportion of Stage 2 loans in Greece was stable at 13.3%, as of the third quarter of 2021, according to the EBA.

However, there are risks to this NPL outlook. The Bank of Greece warned that the full impact of the pandemic on Greek banks’ balance sheets may not be clear until later this year. The expiry of government pandemic-related support, as well as the possibility of a further surge in the virus and its impact on the economy, could prompt a new wave of impaired loans.

Greece’s secondary NPL market is expected to open up in 2022. The pandemic slowed business plans and auctions of assets within primary NPL portfolios. It has created a backlog of granular asset and loan deals which are expected to be resold to new long-term investors in the coming weeks and months. Successful secondary market transactions over the year will improve servicers’ recoveries and free up capacity.

Institutional interest in Greece real estate remains high. Major NPL transactions can act as a catalyst to support the secondary market and also inspire long-term investors to establish real estate management platforms. The establishment of platforms further supports future acquisitions as the secondary market matures. Investors are focused on the residential sector, with long-term demand supported by demographic trends. The office market also draws investor attention, as the supply of prime offices in central business districts remains limited.


The Spanish market could see up to €38 billion in new NPEs in 2022, according to forecasts by doValue. Another €29 billion is forecast for 2023 and €26 billion in 2024. This would take the three-year forecast, based on PwC analysis, systemic banks’ annual reports, and EBA Q3 2021 data, to €92 billion.

There are currently around €285 billion in total NPLs in Spain, which reduces to €215 billion, if NPLs already managed by funds are excluded, reflecting the second-highest stock across Europe, after Italy. Spain’s NPL stockpile, excluding those managed by funds, will shrink to at least €2oo billion in 2022, according to an analysis by Haya Real Estate, Tinsa, and Oliver Wyman.  These assets flow through Iberia’s fragmented servicing market. The sector is estimated to be managing more than €260 billion worth of assets. Many believe the servicing sector is ripe for consolidation. The proportion of Stage 2 loans in Spain was stable at 7.3% in the third quarter of 2021, according to the EBA.

Sareb’s reappointment of its servicer contracts will be a major catalyst for market activity. The existing servicer contracts expire in June 2022. The Spanish bad bank is reportedly deliberating reappointing two or three servicers from a current five-strong shortlist: Haya Real Estate, owned by the Cerberus, Altamira Asset Management, of DoValue; Anticipa/Aliseda, of Blackstone; Hipoges, of KKR, and Solvia, of Intrum, according to press reports. The servicer contracts would divide up the ongoing management of Sareb’s assets, valued at €30 billion, according to the same press reports, on a gross book value of €55 billion, according to doValue.

Germany and Austria

In Germany, there could be a modest uptick in new covid-era NPEs come to market by the Spring. Activity is expected to focus on unsecured loan sales, in contrast to trends in Italy and Greece, and in the retail sector, where German banks’ distressed loans are most acute. The depth of capital waiting for deployment could help to narrow the bid-ask spread between vendors and investors to support deal closure. Elsewhere, the Austrian banks are expected to sell cross-border Central and Eastern Europe (CEE) NPLs in 2022, including unsecured loans and REOs.

Waning pandemic support measures will weigh on the economic recovery and the balance sheets of German companies, but new NPEs will be contained. In a survey of 100 German banks, four out of five bank managers (84 percent) expect their NPLs to climb; one-third (32 percent) want to sell NPLs via individual transactions, while one in five (22 percent) via portfolio transactions. Nevertheless, one in five bank managers expects the NPL ratio to increase by more than 20 percent. The proportion of Stage 2 loans in Germany was stable at 8.1% in the third quarter of 2021, according to the EBA. 

Reduced pandemic protections for corporates could see insolvencies and corporate loan defaults increase this year. In the early weeks of the year, holders of Schuldscheindarlehen (SSD) investments, the privately placed, unsecured loan agreements, have caused some nervousness. There has been a flurry of price enquiries in the secondary market for SDDs secured by companies in leisure and tourism, shipping yards, and the automotive sectors, on Omicron-related concerns. The bid-ask spread on SDDs has narrowed significantly since the onset of the pandemic two years ago, which could prompt rising transaction volumes in the sub-sector this year.


In the UK, lenders are carrying loans in default and past maturity across hard-hit pandemic-sensitive sectors (e.g., hospitality, retail, leisure, and hotels). Covenant waivers and loan extensions will run off this year, which could see some delayed distressed loans come to market this year if the trading environment does not improve sufficiently for struggling companies.

The UK government approved £80.43 billion worth of loans across the various coronavirus loan schemes. Of these loans, between 35 and 60% of borrowers could be at risk of default, according to the National Audit Office’s (NAO) October 2020 report. In a separate analysis, the Office for Budget Responsibility (OBR) has suggested that up to 40% of BBLS borrowers could default, potentially leading to losses of as much as £33.7 billion.

This post was written by Timur Peters

Timur Peters is the founder of Debitos GmbH. He holds a diploma in finance and law. He has more than 10 years’ experience in the range of finance.
Before Founding Debitos Timur Peters was responsible in the distribution of Software for Banks and Financial Institutions for Comarch for the D/A/CH Region. Next to this he has worked for several years as a self employed Project Consultant in the area of Financing of Litigation cases, Peer2-Peer Credit Marketplaces and other online projects for financial institutions.


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