(Finance) – “The credit servicing market is going through an important evolution. Although the primary NPL market is more limited, there is still significant growth in the UTP segment and an expansion in early arrears and Stage 2 credits. What until a few years ago seemed unlikely for this type of credit – namely the management through outsourcing – is now a reality for UTPs and will become so for other segments too. Specialized servicers are proving to offer superior performance, thanks to constant investments in strategic technology for credit management activities.” Manuela Franchi, CEO of doValueduring the “Market Watch Npl” developed by the Research Office of Banca Ifis, presented today at Villa Erba, in Cernobbio, on the occasion of the thirteenth edition of the Npl Meeting, the annual event dedicated to the impaired credit industry entitled, this year, “Step Forward”.
“Servicers, like doValue, are able to invest heavily in technology dedicated exclusively to credit management activities. Banks, on the other hand, focus mainly on origination, risk management, balance sheet and relationship enhancement activities the customer. This difference, explained Franchi, allows us to offer highly specialized and efficient solutions in credit management.”
“We see a continuous development of the secondary market, especially in Greece and Cyprus, with the first signs also in Spain and Italy. This is a natural evolution of market dynamics, which opens up new opportunities for operators in the sector, including doValue, to capitalize on the synergies and skills acquired”, said the top manager.
And, regarding theacquisition of Gardanthe stated: “We have made a strategic industrial choicestrengthening our position in Italy after establishing our leadership in Greece and Cyprus. This allows us to expand our relationships with both banks and investors, increase synergies and make greater investments to expand and diversify our business model, with a focus on value-added services.”
“Forever we believe in the pure servicing modelbecause we want to avoid competing with our shareholders and investor customers. Our goal is to provide all of them with the best credit management conditions, and today many operators are moving towards a pure servicing or pure buy model, confirming the validity of our approach.”
“We are witnessing a return in force of traditional investment funds, while marginal or opportunistic operators are progressively exiting the market. This dynamic is leading to greater polarization between those who focus on purchasing and those on portfolio management, strengthening the distinction of skills within the sector and further validating the pure servicing business model embraced by doValue from the beginning.”
“The main objective of the SMD Directive, according to the CEO of doValue, is create a uniform regulatory framework that favors the development of a European secondary market for NPLsincluding unsupervised capital. Through the liberalization of credit transfers and the introduction of the figure of the regulated servicer, the aim is to guarantee greater protection for less experienced buyers, expanding the range of qualified service providers for the management of NPLs.”
“However, the implementation of the SMD Directive in Italy could lead to contradictions with respect to the original spirit of the law. The regulation arrives in an already very competitive and regulated Italian market, with decreasing volumes of impaired loans and growing specialization among servicers. Even if the liberalization of NPL sales can attract new investments, the compliance costs for servicers will inevitably increase, as the new figure of the regulated servicer will be subject to regulations similar to those of banks, except for capital supervision.”
“Despite liberalization, the new regulation may not lead to a wave of new investors or servicers, as increasing regulation will lead to increased structural costs and natural selection among existing players. However, it is an important step to ensure the presence of qualified, supervised and specialized operators, which represent a key factor in maintaining competitiveness in the market.”
“Italy has adopted a restrictive approach by applying the new legislation only to NPLs, excluding UTPs and bad loans managed through multi-tranche securitisations. This asymmetry creates differences in the management of the various types of non-performing loans and could have impacts on the market balance. “
“For groups like doValue, already equipped with a master servicer ex 106 TUB and a special servicer with 115 Tulps license, the implementation of the SMD Directive will not have significant impacts. The new regulation applies only to NPLs of financial origin, excluding credits commercial and securitisations, which will continue to be managed as now. Our special servicer 115 Tulps will continue to operate as an outsourcer for the new regulated servicers 114 TUB and intermediaries 106 TUB, maintaining the fundamental role in the recovery process of impaired loans.”
License passporting considerations in Europe
“The issue of passporting the servicer license in Europe could be interesting for operators active only in Italy. For doValue, said Franchi, this aspect has already been addressed, with the completion of the relicensing process for our subsidiaries in Greece and Cyprus. In Spain, we are awaiting secondary regulation. Any request for a license for the Italian market could be assessed through doNext, with a significant cost saving, given that our master servicer 106 TUB is already supervised by the Bank of Italy. “
“Our investor and shareholder clients have operated in this market in waves. At some stages, they found the market very interesting, while at others they had to deal with the presence of smaller operators, whose return expectations were much lower than to the standards of the private equity fund market. Today, despite the reduced volumes, these investors are carefully observing the opportunities offered by the market.”
Focus on maximization and diversification
“In Italy, we currently manage a volume of 70 billion in credits, to which a further 25 billion will be added with the acquisition of Gardant. Our initial objective will be to focus on maximizing recoveries from the portfolios under management and on realizing the synergies envisaged in the plan industrial At the same time, we will continue to diversify the type of credits managed and the services offered, in order to broaden our value proposition.”
Advantages of geographic diversification
“Our diversification in various European markets, such as Greece, Cyprus, and soon Spain, allows us to balance the variability of the trends of the Italian market. This strategy, concluded Franchi, offers us stability and allows us to seize new growth opportunities also in different economic contexts”.