The market of non-performing debt at banks
The Non-Standard Closed-End Securitisation Investment Funds managed by the BEST TFI S.A. invest primarily in non-performing debt portfolios at banks whose supply depends on the lending dynamics of previous years. From the start of the financial crisis in 2008 until 2010, the banks reduced the number and value of their loans. After 2011 we observed a slow increase in new lending, mainly due to the increasing scale of corporate lending. After the next decline in lending in the second half of 2012, since 2013, the dynamics of bank lending to the non-financial sector as a whole, has stabilised at around 5%, year-on-year.
(source: National Bank of Poland (NBP), as at the end of September 2015)
Despite the relatively low growth of new lending, one can observe a continuing nominal increase in the banking sector, including fewer loss-generating mortgage loans, and thus also an increase in the value of non-performing loans. This phenomenon is presented in the chart below.
At the end of the third quarter of 2015, non-performing debt accounted for 7.9% of the total loans in the banking sector (left scale), and their total value exceeded 75 billion PLN (right scale). Of this amount, retail loans, which are the primary investment target for the investment funds managed by BEST TFI S.A., accounted for more than PLN 40 billion.
PLN 75 BILLION – total value of impaired loans in Poland
PLN 40 BILLION – value of impaired consumer credits
With the increase in the volume of non-performing bank claims, the value of sales transactions for such debt increases as well. In 2014, this amounted to over PLN 13.2 billion, and in 2015 it grew to about PLN 16 billion (BEST TFI S.A. estimates).