After two years of reductions, Portugal has stepped up the sale of non-performing mortgages in an attempt to clean up banks’ balance sheets and strengthen the financial sector. Non-performing loan transactions appear to be picking up again in Portugal. After two years of declines, the sale of non-performing loan portfolios in our country will increase this year, according to a study by Prime Yield. In addition to the atypical transaction involving the Cascais Project for 4.2 billion euros, other portfolios of non-performing loans are expected to be sold by the end of the year. Between January and October, 5.3 billion euros in Non-Performing Loans (NPLs) were sold in our country. This volume was largely due to the unprecedented 4.2 billion euro operation involving the Cascais Project, “which involved the purchase of a servicer and its NPL portfolios”, explains Prime Yield in a statement sent to newsrooms. In addition to these NPL deals, others have already been identified that are expected to close in 2024, totaling a further 2.3 billion euros in transactions.
It was based on this data that Prime Yield concluded in its recent study “Investing in NPL in Iberia” that the sale of NPL portfolios in Portugal will increase in 2024. This is especially true because in the previous two years, annual NPL transactions were less than 2 billion euros (specifically, 1.4 billion euros in 2023 and 1.7 billion euros in the previous year).
This reduction in NPL deals in the country in recent years has a simple justification. “Between 2019 and 2024, we went from 21.3 billion euros of NPL in the national financial system to 5.1 billion. Naturally, the number of portfolios coming to the market from banks during this period was reduced and this slowed down transactional activity”, explains Francisco Virgolino, Managing Director of Prime Yield, quoted in a press release.
In addition, the national market has also “become more mature and other types of operations are emerging. In a European trend, business models and strategies are being rethought to adapt to smaller and changing markets, in order to gain efficiency”, with more corporate business between servicers and investors being observed, as well as an increase in transactions on the secondary market, adds Francisco Virgolino.
In fact, the “great boost” in transactions of defaulted credit portfolios in Portugal this year was precisely due to business on the secondary market, as well as sales by servicers, such as the sale of Algebra Capital and Do Value and their respective portfolios, explained the Prime Yield specialist.
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Source: Idealista
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