The FINANCIAL — IFC, a member of the World Bank Group, and KRUK, one of the leading debt collection companies in Central and Eastern Europe, have agreed to purchase a portfolio of non-performing loans (NPLs) from Bancpost and other subsidiaries of the Eurobank Group in Romania, to help speed up the resolution of NPLs and increase the liquidity of the banking sector in Romania and the region.
The large number of NPLs in Romania and the region has been a serious problem since the 2008 global financial crisis. IFC and KRUK have committed to investing in a portfolio of unsecured retail NPLs originated by Bancpost and other subsidiaries of the Eurobank Group in Romania, with an outstanding total balance of approximately €597 million, according to IFC.
“Active management of the NPL stock is our strategic priority. To do this, we have been exploring and engaging in several de-risking initiatives aimed at further strengthening our consolidated balance-sheet as well as those of our affiliate banks and enhancing their profitability,” said Stavros Ioannou, Deputy CEO of Eurobank. “This transaction is yet another example of the Group’s efforts to lower its NPL ratios, reduce the relevant servicing cost, and transact with strong market participants in terms compatible with the value-creating strategy of the Group.”
The transaction is part of IFC’s Debt and Asset Recovery Program (DARP), a strategic response to increasing levels of NPLs. Globally, DARP focuses on the acquisition and resolution of NPLs and the restructuring of small and medium enterprises. To date, IFC has invested $1.4 billion globally from its own account and mobilized an additional $3.5 billion from other investors, which has allowed financial institutions to off-load $30 billion-worth of NPLs.
“This is one of the largest retail NPL transactions in Romania to date and an important step towards resolving the rising level of NPLs. Through this transaction, IFC is also supporting the Eurobank’s consolidated balance sheet,” said Manuel Reyes-Retana, IFC Regional Head for Financial Institutions Group in Europe, Middle East and North Africa. “By mobilizing funding from the private sector to resolve NPLs, we are increasing the liquidity of local banks and ensuring a continued flow of funds to companies and people who need it.”
The overarching goal of the World Bank Group’s Country Partnership Strategy for Romania is to accelerate the country’s convergence with the European Union by helping to revive economic growth, reduce poverty at a faster pace, and sustain income growth for the bottom 40 percent of the population. Strengthening the local financial system by helping banks reduce their NPLs is a strategic priority.
“Today’s agreement will advance our organization into a higher league of the world’s leading financial players. This is a special moment for the whole team working on this transaction – we have just became a valuable partner for the biggest international institutions, such as IFC. The current transaction means that, cumulatively this year, we will exceed our record-high annual investments amount in Romania,” said Piotr Krupa, CEO of KRUK S.A.
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