The recovery rate of loans in the Cairo securitization implemented by Eurobank under the Acceleration Plan has shown exceptional resilience.
Although the business plan had been drawn up well before the onset of the pandemic, which drastically changed conditions, cash inflows achieved by doValue remain strong and exceed the cost of state guarantees and other expenses, while a significant capital reserve has been formed.
This was achieved despite the complete freezing of auctions in 2020 and the first months of 2021, due to emergency measures to curb the coronavirus pandemic, which resulted in almost zero revenues from asset liquidation. DoValue managed in 2020 to achieve significantly higher revenue, in line with the targets, from loan restructurings, largely offsetting losses from liquidation revenues.
According to the business plans of loan management companies, there are two main sources of income from the utilization of non-performing loans:
- Income from the liquidation of assets, through auctions.
- Proceeds from the curing of problem loans through debt restructuring
In a letter sent by the management of doValue to staff members last week, it was stated that the company supported borrowers tha cooperated with restructuring, many of which included debt relief.
"In 2020, 45,000 loans amounting to almost 3 billion euros were settled, while in the first five months of 2021, another 25,000 loans amounting to 1.7 billion euros were settled, for a total of almost 70,000 customers. In other words, in the two years of the Covid-19 crisis, almost 5 billion euros were restructured."
In addition, the letter emphasizes: "Especially for the loan portfolio of Eurobank, we have designed, negotiated and implemented agreements, on an individual basis, in order to cure and re-service loans with more than 600 million euros."
Risk for state guarantees low
Revenues generated by the Cairo securitization, despite the difficult conditions generated by the pandemic and the coverage of the cost securing the state guarantee, seem to confirm the Finance Ministry estimates that the possibility of the state guarantees being triggered is low.
Bank sources told Business Daily that the possibility of the guarantees being triggered is unlikely, given that the resumption of auctions will lead to a significant increase in liquidity revenues.
Other sources indicate that as time goes by and the better-quality problem loans are dealt with, then recovery efforts will get more difficult. At the same time, they emphasize that the government's obvious effort to limit and postpone auctions for later increase risks.
The optimistic scenario for the recoveries, however, is also supported by the real estate market, where there is a strong buying interest. Prices remained unchanged despite the pandemic and, as bank sources point out, there is strong interest from private investors in the auctions.