The Portuguese market for problem assets is active in the second half of the year, with at least three banks putting non-performing loan portfolios up for sale totaling 265 million euros. The ongoing operations are Banco Montepio's "Project Dão" (60 million euros), BCP's "Project Elsa" (120 million euros) and BPI's "Project Iron" (85 million euros). The three portfolios include a mix of secured and unsecured credit and are composed of granular loans, meaning without large individual debtors. The banks contacted did not comment on the information.
Joining these operations is Novobanco's "Project Horizon," launched in June, to sell assets that belonged to Luís Filipe Vieira, former president of Benfica. This project has a total nominal value of 583 million euros, divided into four sub-portfolios: 66 million euros in debt on assets in Portugal, 25 million euros in debt on assets in Mozambique, 352 million euros in assets in Portugal (including a sale right relating to the FIAE Promoção e Turismo fund) and 140 million euros in units in a fund whose NAV is zero. KPMG is advising Novobanco and has already received non-binding proposals from interested funds.
Portuguese banks have already done extensive cleaning of non-performing loans in recent years, which allows them to have Non-Performing Loan ratios of around 1.7% on average today. A sector source explains that the operations now underway are marginal given the size of the banks' assets and are part of current balance sheet cleaning activity. More deals are expected by year-end.
As a rule, credits that fall into default must be progressively covered by provisions: unsecured credits reach 100% coverage after 3 years, credits with real guarantees after 7 years and credits with mortgage guarantees after 9 years.
