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NPL sales lose momentum in CEE as focus turns south

Investors keep powder dry for Greece and Cyprus; EBRD tempts global investors with co-investment.

Bojan-Markovic-780 Bojan Markovic, the EBRD’s deputy director for economics, policy and governance

Tackling bad debts remains a priority in central Europe and the Balkans, despite substantial reductions in stocks over the last four years, according to EBRD experts.

In the first half of the decade, five countries in the region – Romania, Slovenia, Bulgaria, Serbia and Albania – saw non-performing loans pass 20% of the total, while in Hungary and Croatia figures reached the high teens.

By the end of last year, the only markets where NPL ratios remained in double figures were Albania (14.3%), Croatia (12.5%), Serbia (11%) and Bulgaria (10.2%).

These reductions have been driven by legislative and regulatory changes in key countries such as Romania, which have encouraged banks to write off and dispose of legacy bad debts, as well as by increasing investor appetite for impaired assets from the region.

In 2014, with competition crimping margins in markets such as Spain and the UK, international buyers began looking further east. Romanian banks set the ball rolling, selling close to $2 billion worth of NPLs in the two years to the end of 2015.

More recently, sizeable portfolios have also been changing hands in smaller markets.

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