Italian Npl Market

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The Italian NPL market
Why investing in Italy?
April 2011

PwC

Foreword & Content
Foreword
Given the recent increase in activity on loan portfolios in a number of key banking jurisdictions across Europe, including Italy, and the complexity of the Italian NPL market, we thought useful sharing the main features of the current market and the reasons on why this market might be interesting from an investor perspective. As per our extensive experience in advising both buyers and sellers in the main NPL deals arranged in Italy we would be happy to provide you with further insights on such market and on how turning your investment goals into a successful transaction. Kind Regards

Content

1.

The macroeconomic and real estate market environment

2.

The Italian banking system in a nutshell

3.

Do banks need to urgently sell

NPLs?
4. How big is the Italian NPLs market? 5. 6. The NPLs management Past NPLs transactions and investors interest 7. Closing remarks

Fedele Pascuzzi fedele.pascuzzi@it.pwc.com Antonella Pagano antonella.pagano@it.pwc.com Laura Gasparini laura.gasparini@it.pwc.com

PwC

April 2011 1

1

The macroeconomic and real estate market environment
Table 1: GDP data
GDP - percentage change on prev ious y ear
2009A Italy France Germ any UK Spain Euro Area (1 6 countries) -5,2% -2 ,6% -4 ,7 % -4 ,9% -3 ,7 % -4 ,1 % 2010F 1,3% 1 ,6% 3 ,6% 1 ,3 % -0,1 % 1 ,7 % 2011F 1,1% 1 ,6% 2 ,2 % 2 ,2 % 0,7 % 1 ,5% 2012F 1,4% 1 ,8% 2 ,0% 2 ,5% 1 ,7 % 1 ,8%

A slow moving economy but with a liquid Real Estate market
After a negative trend in 2009, Italian GDP recorded a positive result (+1.3%) and is expected to grow over the next couple of years, even if at a slow pace. Unemployment rate in 2010 stands at 8.5%, below Euro area average (10.6%) and is expected to remain stable 1 . In 2010 the amount of loans to Italian non financial institutions increased by 1.6%, versus an average of 0.4% of the Euro area countries, thus confirming the positive attitude towards the Italian system 2. Real estate market has been more stable than other European countries during the 2008-2009 turmoil period and has booked a +1.6% increase in turnover volumes in 2010, driven by commercial and residential, versus a 0.7% average Euro area. This is also due to the high saving rate of Italian families and the common investment of Italians in the housing market (ca. 80% of Italians live in a property house). In terms of real estate price trend, 2011 is expected to start to grow again after the downwards results achieved in 2009 and 2010, which resulted, in any case, lower compared to other European Countries. Key Message: Despite the slow economic growth, in Italy the lending business to individuals and corporates grow more than other European countries and the real estate market volumes and prices are more stable, due to the saving rate and the common investment of Italians in the real estate market 1. 2. Source: Eurostat data Source: ABI Monthly Outlook – February 2011

Source: Eurostat

Table 2: Real Estate turnover
2010F Volumes 111.500
91.200 7.000 7.800

% Change YoY
2007 2008 2009 2010F 2011F

Count ry

Italy
of which: Residential Offices Commercial

4,9
5,0 7,1 4,1

-3,6
-4,3 1,3 2,6

-10,0
-10,1 -6,6 -2,6

1,6
1,9 -1,4 2,6

2,7
NA NA NA

France
of which: Residential Offices Commercial

135.150
67.900 26.450 19.100

3,0
3,7 2,1 3,2

-1,2
-0,4 0,0 -2,6

-18,7
-27,9 -6,8 0,0

0,8
0,4 1,0 2,2

2,5
NA NA NA

Germany
of which: Residential Offices Commercial

166.600
96.900 26.500 29.600

4,8
5,5 3,5 4,0

-0,5
-0,4 -1,3 1,1

-9,6
-13,6 -1,3 -0,4

2,4
1,5 2,3 4,6

3,4
NA NA NA

UK
of which: Residential Offices Commercial

112.300
45.500 27.000 28.000

2,7
3,6 2,1 2,7

-2,0
-0,8 -3,5 -2,0

-11,3
-18,4 -6,8 -11,3

1,4
0,7 4,2 1,4

1,5
NA NA NA

Spain
of which: Residential Offices Commercial

74.700...
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