Macro-financial outlook with a view on NPL s and debt restructuring. Vedran Šošić, Vicegovernor

Transcription

1 Macro-financial outlook with a view on NPL s and debt restructuring Vedran Šošić, Vicegovernor February 215

2 Outline of the presentation Banking system performing well. Elevated NPL level appears to be the only weak point. Corporate sector solid operational profitability, but elevated leverage. Banks NPL resolution efforts grinding to a halt. PBS scheme many agreements already reached, but with virtually no impact on the level of bank s claims. Foreign creditors of the Croatian corporate sector are also feeling the pain. Resolving corporate NPL s and fostering corporate restructuring will require joint effort of domestic and foreign creditors. 2

3 Banking system well-placed in European rank tables, H1/214 4 Tier 1 ratio 26 DK Loan to deposits* 32 EE 2 SE LU 24 MT IE FI IT 16 LT SE HRBGLU LV CZ SK GRDK BERO FI DE SI NL PLHU CY UK FR AT IT ES PT 14 8 AT NL DE FR IE HR LT PT MT ES BE CY EE GR SI PL LV UK HU SK BG RO CZ NPL ratio CY GR 2 1,5 1,5 Return on assets RO IT DE FR FI UK SI NL GR IE BE DK ES CY LU SE SK PL LT HR BG MT LV CZ EE 25 AT 2 RO SI IE BG -,5 15 HR IT HU LT ES PT DK SK FR LV BE AT PL SE FI UK EE DE MT NL -2,5 Source: ECB (Consolidated banking data), June 214. *Loan to deposit ratio is calculated as total loans and advances to non-financial institutions deposits. -1,5-2 HU PT 3

4 Croatian NFCs: Operational profitability on par with EU average 6% EBITDA / Sales (213) 5% 4% 3% 2% 1% % 12% 1% EBITDA / Total Assets (213) EU28 Old Europe New Europe Croatia 8% 6% 4% 2% % Source: BvD Orbis database. The reports on Orbis database are standardised into a format created to accomodate regional variations in filing regulations and accountancy practices. The indicators are calculated based on agregated values. 4

5 Croatian NFCs: Slightly higher leverage than EU average % 4% 35% 3% 25% 2% 15% 1% 5% % Debt / EBITDA (213) Debt / Total Assets (213) EU28 Old Europe New Europe Croatia Source: BvD Orbis database. The reports on Orbis database are standardised into a format created to accomodate regional variations in filing regulations and accountancy practices. The indicators are calculated based on agregated values. 5

6 q3/214 billion HRK % % NPL resolution efforts grinding to a halt NPL resolution, by method Sales within group (ownership) Sales outside group (ownership) Repossession Write-offs Total (cumm. as of Sept. 214 NPLs) - right NPL resolution structure, by sector (debtor), from Corporate Sales within group (ownership) Households Sales outside group (ownership) Write-offs Without NPL resolution activities implemented so far, NPL ratio would amount to over 19%. On average, more than 8% of all resolution activities referred to corporate sector. Banks have been more inclined to deal with the corporate NPL s in house. 6

7 Pre-bankruptcy settlements (PBS) making a good progress Construction has high share in all debt of companies in PBS (also significant part of professional, scientific and technical activities are also connected with construction) 12,3 15,3 9,6 5,6 4,3 Construction and real estates Professional, scientific and techical activities Trade Accomodation and food service activities Information and communicaton Pre-bankruptcy settlements for bank clients seem to be progressing slightly better (by shares in banks coporate loans) 2,5 23,7 Agreement reached or executed 27,3 46,5 Business plan accepted or being modified Process started or sent to the council Agreement refused, abandoned or delayed 16,9 Other Source: Financial agency (July 214 data). Source: Financial agency (July 214 data). During 213 and 214, firms entered PBS with 61 billion kuna of total liabilities. Those companies hold about 1% of total corporate loans. 7

8 However, initiating PBS has not yet produced a visible effect on the corporate debt billion HRK Total bank loans to NFCs in pre-bankruptcy procedures 14,7 15,2 12,8 11,9 11, So far, deleveraging intensity and loan trends do not significantly differ in PBS firms relative to total population. Outstanding loan amount in PBS firms in 214 is relatively stagnant, suggesting that banks have not yet taken haircuts on loans to companies in PBS. 8

9 million EUR % of gross external debt Foreign creditors are also feeling the pain: Foreign debt falling into arrears 2. Arrears on foreign debt, EUR million 12, Arrears on foreign debt, per cent of gross external debt, by debtors activities 1.6 1, , 6, 4, 4 2,, Total Private non-financial corporations Total Private non-financial corporations Arrears on foreign debt basically comprise of corporate arrears. 9

10 million EUR million EUR NFC s arrears concentrated in only a handful of activities and countries of origin By debtors activities By creditors country of origin Nov 214 Construction Trade Real estate activities Accommodation and food services Manufacturing Other Nov Austria Germany 214 Liechtenstein Netherlands Slovenia Switzerland Other Construction and real estate, accommodation and trade account for the bulk of arrears. 1

11 million HRK Resolution of corporate NPL s will require a joint effort Debt outstanding as at end-november "Bad debt*" "Good debt" Foreign debt Foreign debt Domestic loans Domestic loans Firms with foreign debt only Firms with both foreign debt and domestic loans Firms with domestic loans only * Bad debt refers to NPLs and/or arrears Companies that rely solely on domestic debt comprise only a small portion of total corporate debt. 11