“NPL standards would be helpful to us”
Interview with Timur Peters and Peter Reidel from Debitos in the Immobilien-Zeitung.
So far, the secondary market for non-performing loans (NPLs) operates largely without fixed rules. The Frankfurt association Deutsche Kreditmarkt-Standards (DKS) is currently developing clear criteria and has initially launched a survey among market players. Timur Peters, CEO of Debitos, the only German secondary market platform, and Peter Riedel, Product Manager, hope that the rules will lead to better business from mid 2020.
Immobilien-Zeitung: How long has the Debitos platform been on the market?
Timur Peters: Since 2013. In the beginning we mostly worked with credit service providers who were active as processors for banks. At the start it was often non-performing loans without real estate collateral. After that, real estate secured loans and insolvency transactions followed.
IZ: How is your business divided up?
Peters: 40% unsecured consumer loans, 35% real estate secured transactions and the rest are unsecured corporate loans. These are insolvency claims and Schuldschein loans that are not secured by real estate.
IZ: How is your business developing?
Peters: We started out in Germany. We also started to target Austrian banks with commitments in Central and Eastern Europe at an early stage. In the beginning, we focused exclusively on consumer loans, as loans secured by real estate in Germany can be sold very well via foreclosure. In the meantime, we have grown substantially and are active in many parts of Europe.
Peter Riedel: However, we no longer expect large portfolios in Central Eastern Europe, but rather many smaller individual transactions secured by real estate. The economies in this region have hardly grown at all in recent years. If the economic situation in Europe continues to deteriorate, these countries will see a withdrawal of international capital. I am talking here above all about Serbia, Croatia and Romania. This is bad for Austrian banks, which had high hopes here. Poland, the Czech Republic and Hungary are less affected.
IZ: Is Debitos the only NPL secondary marketplace in Germany?
Peters: To my knowledge, yes. Apart from us, DebtX from the USA is also active in Europe, but not in Germany. In Italy, Blinks has recently started with a domestic focus, but has not yet made a transaction. In Great Britain you have NPL markets. But more will certainly be introduced.
IZ: What countries does your business come from – and in which parts?
Peters: Germany, Austria, Central and Eastern Europe still make up the largest part of the cake in terms of transactions. In terms of volume, Italy is now larger and growing. We have also invested there in recent years and see that the market is attractive. We are also active in Spain and the Ukraine. However, we do not hope to do too much business in the Ukraine.
IZ: A standardization of the NPL market is planned. The Frankfurt association Deutsche Kreditmarkt-Standards (DKS) is to develop these specifications. Are you in contact?
Peters: Yes, we are in an active exchange. DebtX and we are members of this association. Buyers, sellers, credit service providers and lawyers are also on board. The DKS has started a survey among the market participants. For example, why so far little use has been made of NPL platforms such as ours and what incentives would encourage the participants to use it more often.
IZ: What do you think in general about the introduction of NPL standards?
Peters: Of course we very much approve of that. So far there are few standardized sales contracts, hardly any standardized data rooms. So standards can only be helpful for our business.
IZ: When do you expect the introduction?
Peters: The European Banking Authority (EBA) already issued standardized data templates last year, but the market has hardly accepted them so far. We expect the introduction to take place in the summer of next year at the latest, but we hope that it will happen sooner.
IZ: Why has such an NPL marketplace not met with much approval from the players so far?
Peters: The business is very much in the hands of consultants such as EY, KPMG, PwC and Deloitte. They have a very good branding in the market. And many banks are already in contact with these consultants anyway through the audits carried out by the same firms there. That is why they often take over transaction consulting. Ultimately it is a sensitive issue. It is also about the sensitivity of data. At the beginning it was difficult to break up these structures and build up references. We are slowly but surely making a name for ourselves on the market.
IZ: Are German banks more cautious?
Peters: They feel less pressure to sell their NPLs. It’s different in Italy or Greece. The players there are mostly interested in efficiency, results and higher purchase prices. For many German banks, on the other hand, the focus is on compliance issues and the impact on the markets.
IZ: Do you see signs of an economic slowdown in Germany?
Peters: The number of insolvencies rose this year for the first time in ten years. Many corporate loans are collapsing. Of course the ECB is still countering this with its zero-interest rate policy.
Riedel: Trade in Schuldschein loans is on the rise – also in retail. This may be an indication of a slowdown. But in general, vacancies in shopping malls or city centres will increase. In the UK, a sum of EUR 2 bn must already be refinanced now. This will probably not succeed, so that a large number of malls will become insolvent. Similar situation in Poland: There, significantly less is being invested in the retail sector. Predatory competition is very strong.
IZ: Back to Germany.
Riedel: Hundreds of nursing homes here are possibly facing insolvency. Such homes need an incredible amount of staff and are subject to different regulations from state to state.
IZ: How high are your transaction fees?
Peters: Our rates are currently around 0.5% to 6% of the purchase price – depending on the volume size. 60% to 70% of our activities on the marketplace are automated. Our focus on the volume of traded loans is between about 5 and 300 million euros. For sums above this, we are in fiercer competition with the advisors.
IZ: How many transactions have you handled so far?
Peters: So far, a total of more than 290 transactions with a nominal volume of almost 5 billion euros have been handled via Debitos. 72 transactions worth 1.4 billion euros have been secured by real estate. We now have over 800 investors registered with us. Nine real estate secured transactions with a volume of EUR 116 million are currently in progress. For 2020, we expect up to 200 European transactions with a preliminary volume of between EUR 1 and 2 billion – mainly from Italy.
The interview was conducted by IZ editor Daniel Rohrig.