Poland’s distressed debt recovery market could be about to benefit to the tune of billions as the nation’s banks look to sell off the worst performers from their home loan portfolios.
A Reuters report explains that around 3% of Polish banks’ total mortgage portfolios are performing badly, roughly twice as many as in 2009.
With interest rates at rock-bottom lows, the banks are looking to ensure their profitability – and offloading the worst of their debts is one way to do just that.
As a result, over $3 billion of distressed debt recovery work could move into the hands of private debt collectors, and Poland’s largest, Kruk, has already taken on one deal worth 230 million Polish zloty (PLN) this year.
Jacek Furga, vice-president of the Polish Banking Union, told Reuters: “These loans do not earn money and are also a frozen cost for banks, which have to create reserves for them.
“Banks are becoming interested in selling their non-performing mortgages.”
The Kruk deal was made at less than a third of the total potential value of the loans involved – making a possible 710 million PLN or more for the Polish debt recovery specialist to claim from distressed debtors.
In reality it may be difficult to get close to 100% of that total, but recent years show Kruk’s recovery volumes from such portfolios are on the rise.
For the 2013 financial year, 367 million PLN was invested in such portfolios, with the deal mentioned above accounting for about two thirds of the total.
Recoveries, on the other hand, reached a record high of 538 million PLN – up from 451 million in 2012, and with profitability of 97.8 million in 2013 compared with 81.2 million the previous year.