The Italian NPL market - PWC - June 2016

Foreword
Volumes of transactions doubled in 2015 compared to 2014,
with the amount of disposed loans reaching €19 billion at the
end of last year. Q1 2016 began with €5 billion new deals in
the market, both in consumer, secured and secured leasing
areas.
The Government has put in place various reforms to give a
clearer and leaner context for NPL market players: acting on
improving procedures and shortening foreclosure timelines
via legal and regulatory measures; facilitating NPL portfolio
funding (GACS) and improving the tax regime.
In the meantime the investor base is confirming its interest
and commitment to the Italian market, not only through
portfolio investments but also via more complex structured
deals involving platforms and financial institutions.
In addition, there is the new role of the recently formed
Atlante fund: will it be an accelerator of deal flow or will its
impact be marginal given its limited capitalisation? Will it be
counterproductive by improving the situation of a few selected
banks but at the cost of increasing, directly or indirectly, the
NPE exposures of healthier banking institutions and
increasing interlinkage?
With gross NPE stock in excess of €340 billion and pressures
on banks to reduce these exposures, Italy remains one of the
largest global markets for Non-Performing Assets.
There is greater government and regulatory support for, and
commitment to, the sale and resolution of NPL credits versus
prior market cycles to accelerate bank sector rehabilitation
and improvement to the real economy. In addition, banking
sector wide pressures imply a more comprehensive NPL sales
cycle than prior Italian NPL market cycles.
Is the NPL volcano ready to erupt?
Fedele Pascuzzi
fedele.pascuzzi@it.pwc.com
Patrizia Lando
lando.patrizia@it.pwc.com
Lucia De Vecchi
lucia.de.vecchi@it.pwc.com
Contents
1. Macroeconomic scenario 4
2. Italian real estate market 6
3. Legal framework 8
4. Italian banking system dynamics 12
5. Italian banks overview 14
6. The NPL servicing market 18
7. Market recent activity and outlook 22
Appendix 24

4 The Italian NPL market | The NPL volcano is ready to erupt
01
Key message: As demonstrated by the main macroeconomic drivers, the Italian
economy has taken a significant step towards recovery during 2015 and it is
expected to continue to improve over the next two years. This is primarily driven
by improvement in the European Real Estate market, lower interest rates, a
stronger job market, higher GDP growth and expected benefits of structural and
political reforms.
Macroeconomic scenario

5PwC
Forecasts of the major economic-
financial institutions show that the
Italian economy is recovering. This
domestic recovery will largely offset the
effects of the emerging markets’
slowdown on the Italian economy.
After a prolonged negative
macroeconomic trend, GDP growth
turned positive in 2015. This trend is
forecast to continue and accelerate
throughout 2016 and 2017. With a
growth rate of 1.4% projected for 2017,
Italian GDP growth will converge with
the European average (Chart 1 and 2).
The public deficit is expected to continue
its downward trend as a result of higher
tax collection and a lower interest
payments on public debt.
The Italian government, through PM
Matteo Renzi, introduced the “Jobs Act”
in 2014. The Act aims to improve
flexibility in the job market providing an
increase in new permanent contracts
and services. A reduction in
unemployment rate from 11.9% in 2015
to 10.5% in 2017 is anticipated.(1)
Investments in Commercial Real Estate
in Europe increased by 18.0% during
2014, (total € 253 billion), driven by
lower lending rates and economic
recovery. While the UK remains the
most significant share of investment
activity at 34%, Italy continues to
account for a very small share, at only
3.2% (€ 8.2 billion) of the total amount
invested in 2015 (Chart 3). This share
and volume of inward property
investment versus that of the U.K.,
Germany and France is lower than
would be expected given the relative
sizes of the economies.
As Italy appears poised for a stronger
recovery and given the late property
cycle status and advanced bank sector
recovery of the other markets – this
could indicate more significant flows
into Italian property (including via NPL
investment). However, foreign
investment and market activity is
concentrated in the leading Italian
sub-markets and prime locations.
(1) PwC analysis on Prometeia forecast
Chart 1: Main macroeconomic drivers in Italy
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
GDP (%) Inﬂation (%) Unemployment
rate (%)
Public deﬁcit (%
GDP)
Balance of
payments (%
GDP)
2014 2015 2016 2017
Source: PwC analysis on European Economic Forecast 2015
Chart 2: European GDP vs Italian GDP
0.9%
1.5% 1.5% 1.5%
1.6%
-0.4%
0.7%
1.2%
1.4%
1.3%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2014 2015 2016 2017 2018
Uem Italia
Source: PwC analysis on Prometeia forecast December 2015
Chart 3: Real estate investment market in Europe
0
15
30
45
60
75
90
2014 2015
(€ million)
Source: PwC analysis on BNP Paribas Real Estate Report
*Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia

02Key message: After a positive performance during 2014, the real estate
market continued its momentum with a 4.7% increase in NTN(2)
in 2015 from
2014. Commercial and residential real estate showed an increase in volumes
invested, albeit from a low level of activity. This trend is more robust in the
main city markets: Rome and Milan.
Italian real estate market
NTN
The number of standardized real estate units sold (“NTN”)
reached 963,902 in 2015 (Chart 4), an increase of 4.7% from
2014. The Residential sector showed the largest increase from
2014, +6.5%, reaching 444,636 NTN. As shown in Chart 4 the
increase in residential NTN started in 2014 and is continuing
its positive trend.
Chart 5 demonstrates that the North of Italy (52% share ) is
the largest and strongest regional sub-market. In addition, of
the residential real estate units sold, the biggest increase from
2014 was also in northern Italy (+8.0%).
Investments in CRE
In 2015, Real estate investment volumes reached € 8.2 billion,
an increase of 55% from 2014. Foreign capital remains the
largest portion of the transactions volume of Italian
investments at 74% (€ 6.1 billion), up € 2.1 billion from 2014.
The Office market segment kept its upward trend during 2015,
accounting for 37% of total investments (€ 3.0 billion). The
Retail sector registered a decrease in volumes from 2014 level
(-47%) due to lack of product supply, stabilizing at € 1.4 billion
in 2015. The Industrial and Logistics segment represented the
least significant market sector by volume (€ 305 million)
(Chart 6). The hotel segment is experiencing an increasing
level of interest from international investors. The quality of
supply is the main limit to a strong market recovery.
(2) NTN is the number of standardized real estate units sold, taking into account the share of the property transferred.

7PwC
(3) The sector “Other” includes hospitals, clinics, barracks, telephone exchanges and fire stations
(4) Appurtenances comprehend properties such as basements, garages or parking spots.
Chart 4: Trend NTN residential real estate (2004-2015)
-
200
400
600
800
1,000
(/K)
Source: PwC analysis on OMI quarterly note
Chart 5: Residential NTN by geographical areas 2015
North
52%
Centre
21%
South
27%
Chart 6: 2015 Investments in CRE Italian market by sector
Ofﬁce,
37%
Retail,
17%
Industrial &
Logistics, 4%
Hotels,
10%
11%
Mixed-used
properties, 21%
Total capital
8.2 bn
Foreign
6.1 bn
Domestic
1.8 bn
Other (3)
0.2 bn
Other,
Source: PwC analysis on BNP Paribas Real Estate Report
*Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland,
Romania, Slovakia
Table 1: 2014-2015 Italian NTN comparison by sector
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Tot 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Tot 2015
Residential 98,446 107,647 94,888 116,543 417,524 95,455 116,523 105,105 127,553 444,636
Office 2,134 2,182 1,897 2,805 9,018 1,997 2,101 1,913 2,831 8,842
Retail 6,242 6,092 5,428 7,991 25,753 5,918 6,725 5,826 7,765 26,234
Industrial 2,131 2,444 2,015 2,992 9,582 1,979 2,250 2,059 2,954 9,242
Appurtenances(4)
77,456 84,117 73,543 95,502 330,618 74,621 89,238 80,164 100,825 344,848
Others 29,348 31,772 29,236 37,997 128,353 28,411 33,322 30,179 38,188 130,100
Total 215,757 234,254 207,007 263,830 920,848 208,381 250,159 225,246 280,116 963,902

03Key message: Over the last year the Government has implemented several
measures aimed at acting on improving procedures and shortening foreclosure
timelines via legal and regulatory measures; facilitating NPL portfolio funding
(GACS) and improving the tax regime.
Legal framework
Foreclosure and insolvency law reforms
Guarantee Scheme (GACS) – A government sponsored
solution to facilitate the financing of NPL purchases.
As per the recent Law n. 49/2016, the new Guarantee Scheme
for Securitisation of NPLs (Garanzia Cartolarizzazione
Sofferenze or “GACS”) is aimed at increasing liquidity in the
market by facilitating leverage on portfolio sales. This tool is
part of a wider set of initiatives and reforms the Government
is continuing to implement.
GACS is a provision for a government guarantee on senior
notes issued by an Italian SPV. The notes are backed by NPLs
assets that are serviced by external servicers, which are
independent from the originating bank.
The intervention of the Italian Government is limited to the
coverage of the interest and capital payment obligation on the
senior tranches of notes. The guarantee can be called on the
amount outstanding on the senior notes at their legal final
maturity date. Payment will be made between 4 and 9 months
from the time the representative of noteholders issues a
request for payment.

9PwC
Chart 7: Recent legal reforms
A set of criteria governs the eligibility
for the senior notes to receive the
guarantee. Among these:
–– The senior notes need to be rated
investment grade and the rating
is not revocable.
–– The bank has to sell at least 51%
of the junior tranche.
–– It must obtain deconsolidation
and de-recognition of the assets
sold.
–– The bank cannot be affiliated
with the servicer.
–– The waterfall allows for the
repayment of the principal on the
senior to be subordinated only to
the payment of interest on the
mezzanine (if issued), but not the
junior notes.
–– The premium for the guarantee is
a senior cost in the waterfall and,
to assure the aid-free nature of
the scheme, is at a market-rate:
based on the average price of a
basket of single name CDS
covering investment grade rated
Italian companies, for the same
duration of the notes.
Reform to the legal and
insolvency process for
resolution of NPLs
The recent Law n. 132/2015 has
addressed many legal issues related to
credit recovery, legal and technical
solutions, but in particular:
99 Extended the use and filing of
digital documentation to reduce
administrative burdens,
improving the timing and
simplifying recovery procedures.
99 Modified the auction process by
allowing the possibility to offer a
discounted auction price (up to
25% discount) from the initial
price set by the judge.
99 Introduced the pre-bankruptcy
composition plan allowing the
possibility of competitive
auctions and permitting the
reduction in the number of
financial creditors representing
up to 25% of the total exposure.
Law n. 49/2016, provides for the
application of a minimal fixed (€200)
register tax for assets bought in the
framework of a foreclosure or
insolvency procedure (against 9% of
sale price as was previously applied).
Law Decree n. 59/2016 provides for
measures on foreclosure, insolvency
proceedings and guarantees aimed at
reducing the length of judicial
procedures and simplifying the auction
process. Among these:
99 A new security interest over
movable assets (“pegno mobiliare
non possessorio”) similar to the
“floating charge”.
99 The possibility for banks and
other authorized financial
institutions to agree to the
transfer of title over defined Real
Estate asset(s) in case of default
(“patto marciano”).
99 The digital registry of foreclosure
and insolvency proceedings.
99 The provisional execution of an
injunction order for a claim not
challenged by the borrower and
no opposition to enforcement
procedures allowed if the asset
disposal process has already been
started.
99 Some amendments to bankruptcy
law allowing creditors’ meetings
and hearings to be held using
electronic tools.
Most players believe the measures put in
place are valid and beneficial. However,
it will take some time for the full effect
of such measures to be observed and to
be factored into the valuation model of
the investors and finally, to translate
into higher selling prices.
August 2015
Law
132/2015
May 2016
Law Decree
59/2016
April 2016
Law
49/2016

Key message: Starting from January 2015, the Government implemented a set of
legal and regulatory reforms of the banking sector aimed at making the system
more efficient and facilitating the consolidation process.
Reforms of Cooperative banks
In January 2015 the Italian Government
started the implementation of several
reforms focused on the cooperative
banks segment (“Banche Popolari”)
aimed at making the banking system
more efficient and facilitating the
consolidation process.
In March 2015, the Government
approved Law n. 33/2015 in urgent
measures for banking system and
investments, which transformed the 10
largest cooperative banks into a joint
stock company.
In February 2016, the Government
approved the reform of the smaller
cooperative banks (so called “BCC”),
with a net equity lower than €200
million.
This BCC reform foresees the set up of a
parent company with a minimum equity
of €1 billion, with the majority of equity
owned by the cooperative banks. The
banks will either have to adhere to or be
transformed into joint stock companies.
The parent company will have a
supervision and coordination role over
the BCC, thus granting more stability and
oversight to the system. This should
strengthen the Italian cooperative
banking system and improve their capital
market funding and governance profile.
Art. 106 Single Register
Financial Intermediary
The Decree n. 53/2015 concludes the
reform of the non-banking financial
intermediaries which began in 2010.
The reform was designed to consolidate
all non-banking financial intermediaries
that provide financing of any form to the
public, to converge their regulation
under Article 106 TUB and ensure a
supervisory regime by the Bank of Italy
(Single Register Financial
Intermediary).
In order to be eligible under Article 106
of the Banking Act, all the financial
intermediaries interested had to submit
a request for approval of such
designation to the Bank of Italy. The 106
eligibility requirements are pervasive
and similar to the ones needed to obtain
a banking license in terms of
governance, prudential requirements,
control systems, and financial reporting.
The NPLs servicing market includes
financial intermediaries under Article
106 (and thus supervised by the Bank of
Italy). It also includes the collection
agencies regulated under Article 115 of
the Public Security Act, which are not
supervised by Bank of Italy but simply
need to obtain a license from the Central
Police Station with lower level of
supervision and qualifying requirements.
The largest part of the collection
agencies are aggregated under Unirec, a
private association, which performs a
supervision activity on the associated
agencies (i.e. verification of the
existence of shareholders and managers
integrity requirements, compliance with
code of conduct, etc.).
Article 106 TUB intermediaries can
exercise financing activities as well as
collection of disposed receivables and
payment services relating to the
securitization, while Article 115 TULPS
intermediaries can only conduct credit
recovery.
Securitisation structures often provide
for delegation of credit recovery
activities from 106 financial
intermediaries to 115 entities. However,
the 106 servicer keeps full responsibility
for any activity outsourced to Article
115 servicers.
Legal framework
Regulatory reforms

04
Key message: The combination of regulatory changes at European and Italian
level is signaling a requirement for a deep restructuring of the Italian banking
sector. However, real implementation and more than surface level change is
necessary to reach the more efficient and profitable banking sector that is
required to deliver sector stability and meaningful credit growth to the real
economy.
Italian banking system dynamics

13PwC
The Italian banking system is going
through a deep reorganization as a
result of several factors originating from
both European regulatory changes, local
specific events and consumer and
technological changes impacting the
broader global banking sector.
Since the implementation of the Single
Supervisory Mechanism (“SSM”) some
Italian banks have been under pressure
from the ECB for strengthening their
equity base and reducing NPL
exposures. This, combined with the
sectorial and business model issues that
all banks in all national markets are
facing today (technology disruption,
changing consumer preferences, the
banking business model), represents an
even more serious challenge for Italian
banks, which rely heavily on traditional
retail business, already overburdened by
high fixed costs (e.g. branches,
personnel, etc.), significant cost income
ratio as well as a shrinking interest
margin.
In this framework, the availability of
significant amounts of liquidity from
international financial players
represents a potential opportunity for
addressing some of the issues of the
Italian banking system. In particular
sourcing equity capital and imposing
more transparency and market
discipline.
Among the recent events:
• The Government rescued four local
troubled banks (Banca Marche,
Cariferrara, Banca Etruria and
Carichieti) by transferring their
€8.5 billion of NPE to a single
vehicle (called REV), and placing
them on the market for sale. The
sales process for these new banks is
ongoing and both local banks and
international investors have
expressed their interest. The NPEs
within REV will also be disposed
over the near term. The value at
which such loans were transferred
from the originating banks was
equal to 17.6% of GBV (25% on
secured and 8% on unsecured).
• After some months of discussions,
the merger plan between two of the
big cooperative banks, Banco
Popolare and Banca Popolare di
Milano has been approved by the
two boards and the deal is expected
to be completed before year end.
After the merger the new entity will
be the third largest bank in the
Italian market. As part of the plan
Banco Popolare will strengthen its
equity with a €1 billion capital
increase and will implement over
the next 3-4 years a resolution plan
for addressing its NPL exposures.
• Banca Carige’s new board rejected
an offer from Apollo fund for the
acquisition of the entire NPL
portfolio at 17.6% of GBV and a
share capital injection of
€600million to provide liquidity to
the bank. However, the Apollo offer
and structure itself could be a
template for other transactions as a
means to facilitate larger scale bank
resolution and foreign capital
investment.
• MPS, in combination with its
ongoing NPL deleveraging activity,
is considering possible strategic
options to create value from its NPL
servicing platform. The rationale
would be to form a partnership with
a highly specialized player which
could generate an upfront economic
and financial benefit, combined
with a long term value creation
linked to the enhancement of the
credit collection performances.
• Following its recent failure to gain
admission to the Italian Stock
Exchange, Quaestio Capital
Management has underwritten €1.5
billion of share capital via the
Atlante Fund which now holds
99.33% of Banca Popolare di
Vicenza’s capital.
• Like Banca Popolare di Vicenza,
Veneto Banca is experiencing
similar challenges in
recapitalization and rehabilitation
due to severe losses, largely as a
result of the provisioning on their
NPL exposures. The ECB has given
the Bank until 30th June to
complete its capital increase. Veneto
Banca is also considering merger,
not only the IPO. In that context,
one possible solution for the bank
may be Atlante.
Atlante is a fund formed for the purpose
of purchasing shares in banks which
remain unsold to the market,
purchasing NPL portfolios or
subordinated notes issued by NPL
securitisation. The fund has €4.25
billion of equity contributed by 67
institutions, with no investor holding
more than a 20% stake. It has a 5 year
term with the possibility of extension to
8 years. Its return objective is
approximately 6%.
This scheme, which gained the blessing
of ECB, is a tool to provide short term
moderate cost capital and support the
sale of NPL portfolios at higher prices,
helping stabilizing the system. Its return
objective enables it to acquire NPLs at a
higher price than other market
participants, enabling banks to reduce
their immediate loss on sale.
Expectations are for an increase in sale
price of 4% of GBV in comparison to a
market sale to traditional NPL investors.
Combined with the GACS it could assist
in the resolution of a significant amount
of NPLs.
The limit to the effectiveness of Atlante
to make a material impact on the NPLs
disposals will largely be its size (equity
resource). Its return objective is lower
than the return demanded by the
majority of existing international
investors, so it is likely to be capitalized
only by existing Italian market
participants.
Given its size, however, we do not
believe that that the fund will
substantially limit market opportunities
for distress investors at market returns.
One potential concern expressed by
some market analysts is that it may
weaken those institutions investing in
the Atlante fund, who in turn are
increasing their interlinkage with
weaker institutions and their indirect
NPE exposures. This raises the
probability of earning a lower return on
the equity invested versus other market
investment opportunities, including
new lending.

05
Key message: Gross non performing exposures in Italy have shown
continuous growth over the period 2008-2015, with volumes at the end of 2015
equal to four times those of 2008. Therefore, since the onset of the credit crisis,
while other national markets have largely resolved their NPL problems and
rehabilitated their banking sectors, the NPL problem has continued to
deteriorate in Italy.
Italian banks overview
In December 2015, gross Non Performing Exposures (NPE)
reached €341 billion, four times higher than 2008 (CAGR
2008 – YE-2015 +22.2%) but substantially stable versus
H1-2015. About 58.0% of the total amount of NPE, equal to
€200 billion, is related to NPLs.
Compared to 2008, the ratio of NPE to gross loans is five times
higher (4.9% in 2008, 22.0% in 2015). However, in YE-2015
the ratio demonstrated a growth rate lower than the year
before (3.2% in 2014, 1.0% in 2015).
Similarly, net NPLs showed a considerable increase in the
period 2008 – 2015, going from €24 billion to more than €89
billion, an average CAGR of 20.6%.
Looking at the stock composition:
–– Approximately half of total gross NPLs is represented
by loans collateralised by real estate.
–– The amount of net NPL is largely covered by real estate
collateral.
–– Almost 80% of the loans are towards SME and
Corporates, thus confirming that the rise in the NPL
stock is strictly connected to the economic and
financial crisis that hit the Italian economy in 2008.
Chart 8: Breakdown of gross NPL as of YE-2015
47%
53%
Secured
Unsecured
79%
19%
2%
Corporate
Retail
Other
Source: PwC analysis data of Bollettino Statistico di Banca d’Italia and ABI
Monthly Outlook

15PwC
Source: PwC analysis data of Bollettino Statistico di Banca d’Italia and ABI Monthly Outlook
Chart 9: Gross NPL trend YE-2015
42
59
78
107
125
156
184
200
33
57
66
74
91
109
131
127
9
16
12
13
21
18
12
14
2.5%
3.5%
4.6%
6.3%
7.5%
9.8%
11.8%
12.9%
4.9%
7.8%
9.3%
11.3%
14.3%
17.8%
21.0%
22.0%
5.0%
10.0%
20.0%
25.0%
2008 2009 2010 2011 2012 2013 2014 2015
Gross NPL (€bn)
Unlikely to pay (€bn)
Gross NPL / Loans to customers (%)
Gross NPE / Loans to customers (%)
Past due (€bn)
Source: PwC analysis data of ABI Monthly Outlook
Chart 10: Net NPL trend YE-2015
24
39
47
60 62
80
84
89
1.4%
2.3%
2.8%
3.5%
3.8%
5.0%
5.4%
5.7%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2008 2009 2010 2011 2012 2013 2014 2015
Net NPL (€ bn) Net NPL / Loans to customers (%)

Source: Financial Statements as of YE-2015, YE-2014, YE-2013.
Chart 11: Net NPL, net NPL/equity ratio and net NPL to loans ratio YE 2015
20.75
14.97
9.73
6.46
4.29
2.97 2.96
1.49
0.79
0.26
42.0%
31.3%
101.4%
80.1%
43.0%
59.2% 52.4%
32.2%
16.0%
3.1%
4.4% 4.3%
8.7% 8.2%
5.1% 6.8% 4.4% 4.4%
2.9%
0.7%
Net NPL (€bn) Net NPL / Equity Ratio (%) Net NPL ratio (%)
Chart 11 provides a snapshot of the net
NPLs of the Top Italian banks, including
the ratio of net NPLs to equity and to
total loans.
All illustrate a high level of NPLs to
equity ratio as compared to larger
international peers.
Chart 12 depicts the Top 10 Italian
banks in terms of NPE ratio and
coverage: the average of which is 18.4%
and 43.4% respectively. However, a
material variance among the banks
exists, with the two extremes
represented by Mediobanca (5.9%) and
MPS (34.8%) in terms of gross NPE ratio
and by Unicredit (51.1%) and UBI
(27.8%) in terms of coverage ratio. We
note that the coverage ratio is not
directly comparable as it is influenced by
several factors which vary among the
different banks (such as level of
collateralisation of the loans, vintage of
the portfolio, tax policies on write off
etc.).
Chart 12: Top 10 Italian banks – NPE peer analysis as of YE-2015
UCG
ISP
MPS
UBI
BPopolare
BPER
Cariparma
BPM
BNL
Mediobanca
0%
10%
20%
30%
40%
50%
60%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Average= 18.4%
NPECoverageRatio(%)
Gross NPE Ratio (%)
Average = 43.4%
Source: Financial Statements as of YE-2015

17PwC
Chart 13 provides a snapshot of the
NPL ratio and coverage, which once
again provides a fairly diversified
picture with similar trends compared to
those described above. Average NPL
ratio stands at 10.4%, while the NPL
coverage ratio is equal to 55.6%.
Chart 13: Top 10 Italian banks – NPL peer analysis as of YE-2015
UCG
ISP
MPS
UBI BPopolare
BNL
BPERMediobanca Cariparma
BPM
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
0% 5% 10% 15% 20%
Average = 55.6%
Average= 10.4%
NPLCoverageRatio(%)
Gross NPL Ratio (%)
Source: Financial Statements as of YE-2015
• The year-end snapshot indicates that
compared to2014, with the exception
of MPS, there are no material
movements in the gross NPL ratio for
the top 10 banks. The average stands
at 10.4% versus 9.7%, but there are
large variances between individual
banks.
Source: Financial Statements as of YE-2015, YE-2014.
Chart 14: Top 10 Italian banks – NPL movements (YE-2015 vs YE-2014)
UCG
ISP
MPS
UBI
BPopolare
BNL
BPER
Mediobanca Cariparma
30%
35%
40%
45%
50%
55%
60%
65%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
NPLCoverageRatio(%)
Average= 55.6%
Average= 10.4%
Gross NPL Ratio (%)
YE-2015
YE-2014
BPM

The NPL servicing market
06Key message: we foresee significant activity for the credit servicing industry
in the next several years, benefitting from NPLs portfolio sales and the
envisaged reopening of the NPLs securitisations, as well as the continued
outsourcing of loan servicing by banks.

19PwC
Table 2: Main NPL non-captive special servicers
Company
Total AUM
(€m)
3 1.12.15
S pecial
S ervicing
AUM (€m)
Master
S ervicing
AUM (€m)
Total AUM
(€m)
3 1.12.14
#
Employees
3 1.12.15
# Debt Coll.
Ag encies
3 1.12.15
# External
Lawyers
3 1.12.2015
Revenues
3 1.12.15
(€m)
Rating Fitch Rating S &P
Bank of Italy
S urveillance
Dobank 45,088 45,088 - n.a. 618 109 681 90.0 RSS1- and CSS1- Strong Banking Group
Italfondiario 43,106 40,951 2,155 39,700 597 1 400 56.4 RSS1- and CSS1- Strong Albo Unico ex art. 106 TUB
Cerved 12,499 12,499 - 10,000 639 137 330 75.0 RSS1- and CSS1- n.a. Art. 115 TULPS
Prelios 9,450 2,816 6,634 8,700 59 450 < 400 9.5 RSS2/CSS2 Above Average Albo Unico ex art. 106 TUB
Caf 6,980 6,975 5 5,500 169 27 46 17.8 n.a. Above Average Art. 115 TULPS
Guber 7,198 7,198 - 4,700 132 13 250 28.4 RSS2+, CSS2+, ABSS2 n.a. Art. 106 TUB
FBS 5,198 5,198 - 4,300 116 25 1,523 20.2 ABRSS2/RSS2+/CSS2+ Above Average Art. 107 TUB
Fonspa 4,689 1,231 3,459 n.a. 82 - - 16.0 RPS3+/CPS3+ Average Banking Group
Primus Capital 3,110 3,110 - n.a. 15 2 30 5.0 n.a. n.a. Art. 106 TUB
Creditech 2,414 2,414 - n.a. 206 360 86 15.1 n.a. n.a. Albo Unico ex art. 106 TUB
Parr Credit 1,880 1,880 - n.a. 1,033 - - 18.2 n.a. n.a. Art. 115 TULPS
Ofﬁcine CST 1,299 1,299 - n.a. 106 - 261 7.1 n.a. n.a. Art. 115 TULPS
Fire 5,103 4,116 987 1,500 210 15 172 40.2 n.a. n.a. Art. 115 TULPS
AT NPLs 2,000 2,000 - 1,500 50 25 4 4.7 n.a. n.a. Art. 106 TUB
Since the financial crisis, the Italian
credit servicing segment has experienced
solid growth, both due to higher
consumer credit volumes and an ever
increasing number of financial
institutions outsourcing their NPLs to
dedicated servicing and collection
entities.
This market development has been
accompanied by a high level of
competition among credit servicers,
which has led to pressure on fees.
Moreover, clients often require a
customised service for their operations
and demand both flexibility and the
ability to communicate and manage data
consistently with the client bank’s needs.
The credit servicing industry currently
represents a large opportunity and
should see meaningful growth over the
next several years.
Another source of business for
structured independent servicers is the
envisaged reopening of NPL
securitisation market.
In the case of GACS, the presence of a
servicer which is independent from the
originating bank is a pre-requisite for
obtaining the State guarantee. All
Atlante sponsored NPL transactions will
likely seek to use the GACS for funding.
Therefore, third party servicing
platforms will benefit from both private
market NPLs transactions and the
Atlante fund sponsored and GACS
guaranteed NPLs transactions.
International players, understanding
the prospects for this profitable trend
and looking for new opportunities to
exploit, have already broadened their
focus to include a credit servicing
business and a number are interested in
acquiring platforms.
Note: The AuM volumes above comprise
all the asset under management, including
the loans for which the servicer has only a
master servicer activity and does not act
as special servicer. However, the majority
of the volume consists of loans under
special servicing, except for Prelios and
Fonspa which have a predominant
component of volume under master
servicing (70% and 94% respectively).
Primus Capital’s business model is mainly
based on the outsourcing and monitoring
of external debt collection agents and
lawyers.
Chart 15: Main servicers’ revenues and AUM as of YE-2015
Revenues includes “Revenues from Servicing Activities” (A.1) and “Other Revenues” (A.5)
Source: PwC analysis on data provided by Servicers
Source: PwC analysis on data provided by Servicers
45,088
43,106
12,499
9,450
6,980
7,198
5,198
4,689
3,110
2,414
1,880
1,299
5,103
2,000
90.0
56.4
75.0
9.5
17.8
28.4
20.2
16.0
5.0
15.1
18.2
7.1
40.2
4.7
€m
Total AUM (€m) Revenues (€m)
Dobank
Italfondiario
Cerved
Prelios
Caf
Guber
FBS
Fonspa
PrimuCapital
Creditech
ParrCredit
OfﬁcineCST
Fire
ATNPLs

Chart 16: Borrowers geographical breakdown (mix in %)
ItalfondiarioDobank Cerved
C.M.
Prelios Credit
Servicing
CAF Guber FBS Fonspa Primus
Capital
Creditech Parr Credit Ofﬁcine CST Fire AT NPL's
SpA
North Centre South - Islands n.a.
46% 35% 30% 32%
62%
31%
7%
34% 34% 35% 44%
31% 29%
19%
21% 27%
36%
22%
42%
2%
45%
18%
29% 19%
19% 30%
35%
45%
28%
28% 44% 43% 32%
16%
27%
4%
86%
21%
48%
36% 37% 50% 41%
Chart 17: Type of loans managed by GBV (mix in %)
ItalfondiarioDobank
n.a. n.a.
Cerved
C.M.
Prelios Credit
Servicing
Capital
SpA
Secured Unsecured
45%
28%
28%
34% 53%
34%
13%
22%
45%
66% 47%
66% 87%
78% 55%
48%
52%
0.1%
99.9%
6%
94%
13%
87%
5%
96%
28%
72%
Chart 18: Type of loan resolution – Secured (mix in %)
Chart 19: Type of loan resolution – Unsecured (mix in %)
ItalfondiarioDobank
n.a.
Cerved
C.M.
Prelios Credit
Servicing
Capital
SpA
Judicial Extrajudicial Loan Sale Other
26%
6%
36%
5% 5% 11%
n.a.
2%
34%
12%
30%
69%
93%
31%
90%
95%
77% 95% 100%100%
66%
88%
65%
5%
33%
5% 12% 3% 5%
Source: PwC analysis on data provided by Servicers as of YE-2015
ItalfondiarioDobank
n.a. n.a. n.a.
Cerved
C.M.
Prelios Credit
Servicing
Capital
SpA
45%
28%
28%
8% 8%
68%
45%
88%
27%
70%
83%
18%
50%
84%
46%
25%
35%
12%
61%
25%
100%
17%
82%
30%
8%
46%
8%
20% 12% 5%
20%
Judicial Extrajudicial Loan Sale Other

07
Key message: Transaction volumes in 2015 surged to c. €19 billion GBV, a
significant increase versus the volumes in previous years due to an intense
activity on both primary and secondary deals. Despite this, the market is still
very focused on consumer and retail unsecured credits, with some SME and
secured transactions occurring. As a result of the combination of many
different factors discussed herein, volumes are expected to increase
meaningfully, with Q1 2016 registering €5 billion new deals.
Market recent activity and outlook
In 2015, volumes of disposals have more than doubled
compared to 2014, with the amount of disposed loans
increasing to approximately €19 billion. In Q1 2016 the
market registered 8 new deals amounting €5 billion.
The most active banking groups in the disposal of portfolios
during 2015 was Unicredit, with sales of approximately €4.7
billion, MPS with sales of €3 billion, and Banco Popolare with
sales of €1.2 billion.
Several deals involving portfolios and/or platforms are on the
market (the four cooperative bad banks, Interbanca by GE,
HARIT by the Austrian Heta Asset Resolution, Sigla-Si
collection). All are attracting the interest of both local and
international players.
The investors base grew, with new players in the market
(Hoist Finance, PVE) and in addition, some incumbents
strengthening their presence in the market (mainly Fortress,
Deutsche Bank, and Cerberus). Banca Ifis has continued to be
extremely active both buy side and sell side on secondary
deals.
Looking ahead we see clear signs of an improvement in the
conditions for enhancing NPL deal volumes. A key component
is the clearer and more favorable legal and regulatory
framework: after the long await for the systemic bad bank
there is now a scheme in place for facilitating the financing of
NPL securitisation deals (GACS).

23PwC
(5). The sum of transactions reported include the public and not public transactions
Chart 20(5)
: NPL transactions in the Italian market (€ bn)
Source: PwC market analysis
This, together with the reform activity
on foreclosure and insolvency
procedures, the commitment of several
banks to the ECB to reduce their NPE
exposures suggests an explosive mix.
We expect that the activity will be
sustained and our prediction of at least
€30 billion GBV of transactions for 2016
is realistic, possibly conservative.
Furthermore, the percentage of secured
portfolio disposal will be significantly
higher than 2015. The deleverage
process will occur over the next 3-4
years, but the NPL volcano is now truly
ready to erupt.
Table 3 - NPL public transactions in the Italian market in 2015 and Q1-2016
(€ mln)
Year Seller Volume Type of Portfolio Buyer
2016 Q1 Banca Carim 35 Secured Confidential
2016 Q1 Confidential 223 Consumer CS UNION
2016 Q1 Deutsche Bank Spa 240 Consumer Banca IFIS
2016 Q1 Confidential 208 Consumer Banca IFIS
2016 Q1 Confidential 1.000 Consumer Banca IFIS
2016 Q1 Multiple sellers BCC 300 Mixed Secured/Unsecured Bayview Fund Management
2016 Q1 RBS & GE 2.500 Mixed Secured/Unsecured Anacap & Confidential
2016 Q1 CreVal 314 Mixed Secured/Unsecured Credito Fondiario
2015 Q4 Confidential 100 Unsecured Retail Confidential
2015 Q4 Confidential 100 Secured Confidential
2015 Q4 Confidential 1.400 Consumer Banca IFIS
2015 Q4 Deutsche Bank Mutui 172 Secured Algebris
2015 Q4 MPS 1.700 Unsecured Deutsche Bank
2015 Q4 Multiple sellers BCC 121 Mixed Secured/Unsecured Balbec
2015 Q4 Consel SpA (Banca Sella Group) 230 Consumer Banca IFIS
2015 Q4 Banca Etruria 302 Mixed Secured/Unsecured Credito Fondiario
2015 Q4 Banca IFIS 477 Consumer Confidential
2015 Q4 Banca IFIS 503 Consumer Italo Sicav Fund
2015 Q4 Banca IFIS 397 Consumer Confidential
2015 Q4 Banca Popolare - Volksbank 60 Unsecured Banca IFIS
2015 Q4 Morgan Stanley / Prelios 157 Secured PVE Capital
2015 Q4 Unicredit 250 Mixed Secured/Unsecured Cerberus
2015 Q4 Confidential 240 Utility Confidential
2015 Q3 Confidential 160 CRE Confidential
2015 Q3 Confidential 430 Multiple single name Confidential
2015 Q3 Banco Popolare 950 Unsecured Hoist Finance
2015 Q3 Confidential 22 Unsecured Confidential
2015 Q3 Unicredit 1.200 Mainly Unsecured Anacap
2015 Q3 Multiple sellers BCC 320 Mixed Secured/Unsecured CRC
2015 Q2 Seer Capital Management 400 Consumer Banca IFIS
2015 Q2 Unicredit 625 Unsecured PRA
2015 Q2 UniCredit 205 Leasing - Repossessed Assets Cerberus
2015 Q2 Banco Popolare 210 Unsecured Hoist Finance
2015 Q2 MPS Consum.it 1.300 Consumer Banca IFIS (50%) Cerberus (50%)
2015 Q2 Confidential 200 Consumer Confidential
2015 Q2 Banca Sella 33 Consumer Banca IFIS
2015 Q2 Archon 2.000 Mixed Secured/Unsecured Confidential
2015 Q2 Santander Consumer Bank 234 Consumer Banca IFIS
2015 Q1 National Asset Management Agency 182 CRE Invel Real Estate Partners
2015 Q1 Sofigeco 408 Secured PVE Capital
2015 Q1 Findomestic 400 Consumer Banca IFIS
2015 Q1 Unicredit 2.400 Platform & Mixed Sec/Unsec Fortress & Prelios
1.6
4.3
3.1
6.5
1.7
3.6
0.2
1.3
2.1
0.2 1.8
3.0
3.1
2.6
0.8
0.040.6
0.6
3.6
2012
4Total: 5 58 19
2013 2014 2015 Q1-2016
Consumer Unsecured
Mainly Unsecured Mixed Secured/Unsecured
Secured Other
Source: PwC market analysis

Appendix – Top 10 banks peer analysis
Gross NPL volume (€bn)
49.0
34.6
21.6
5.9
8.9
5.8 5.5
0.7 2.2 2.5
53.9
38.2
24.3
6.6
10.5
7.1 6.5
0.6
2.6 3.1
53.2
39.2
26.6
7.0
10.5
8.1 7.1
0.6 1.9 3.3
-
10.0
20.0
30.0
40.0
50.0
60.0
UCG ISP MPS UBI BPopolare BNL BPER Mediobanca Cariparma BPM
YE-2013 YE-2014 YE-2015

25PwC
Net NPL volume (€bn)
NPL coverage ratio (%)
Gross NPL ratio (%)
Net NPL ratio (%)
18.7
13.0
8.9
3.4
5.5
2.4 2.5
0.3 1.0 1.1
20.4
14.2
8.4
4.0
6.0
2.7 2.8
0.3
1.1 1.3
20.8
15.0
9.7
4.3
6.5
3.0 3.0
0.3 0.8 1.5
-
5.0
10.0
15.0
20.0
25.0
61.8 62.5
58.8
41.6
37.9
59.1
55.7 57.8 56.3 55.5
62.2 62.8
65.3
38.8
43.0
62.0
56.5 58.0 56.5 55.9
61.0 61.8 63.4
38.6 38.3
63.3
58.2 59.0 58.2
54.6
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
8.9 9.3
14.7
6.4
9.7
8.4
10.9
1.6
5.6
7.2
10.4 10.3
17.0
7.3
12.0
10.4
13.3
1.7
6.7
8.8
10.3 10.3
19.8
7.9
12.3 12.0
14.5
1.7
6.5
8.9
-
5.0
10.0
15.0
20.0
25.0
3.7 3.8
6.8
3.9
6.4
3.7
5.3
0.7
2.7
3.4
4.3 4.2
7.1
4.7
7.5
4.4
6.4
0.7
3.1
4.24.4 4.3
8.7
5.1
8.2
4.9
6.8
0.7
2.9
4.4
-
2.0
4.0
6.0
8.0
10.0
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015

Gross NPE volume (€bn)
Net NPE volume (€bn)
NPE coverage ratio (%)
Gross NPE ratio (%)
85.5
57.6
36.1
12.7
19.2
11.0 10.3
1.8 3.9 5.3
87.2
63.0
45.3
13.1
21.8
12.3 11.0
2.4
5.0 5.9
82.9
63.4
46.9
13.5
20.8
12.9 11.4
2.2 3.7
6.0
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
41.1
31.1
21.0
9.3
14.1
6.2 6.4
1.0
2.3
3.4
42.6
33.6
23.1
9.5
14.3
6.4 6.5
1.2
3.0 3.6
40.5
33.3
24.2
9.7
14.1
6.3 6.4
1.1
2.2
3.6
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
51.7
46.0
41.8
26.5 26.9
43.6
37.3
44.0
40.1
36.0
51.1
46.7
48.9
27.3
34.2
48.1
40.7
49.1
38.6 38.7
51.1
47.5 48.5
27.8
31.9
51.5
44.2
51.6
40.5 39.7
-
10.0
20.0
30.0
40.0
50.0
60.0
15.6 15.4
24.5
13.7
21.0
15.9
20.3
4.4
10.2
15.0
16.9 17.0
31.7
14.6
24.8
18.0
22.6
6.3
12.6
17.0
16.0 16.6
34.8
15.2
24.3
19.2
23.3
5.9
12.6
16.4
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015

27PwC
Net NPE ratio (%)
Yearly loan loss provision/net interest margin (%)
Net NPL/equity (%)
Cost of risk* (%)
8.2
9.0
16.0
10.5
16.3
9.7
13.9
2.5
6.4
10.2
9.1
9.9
19.3
11.1
18.0
10.3
14.9
3.3
8.2
11.2
8.5
9.5
21.7
11.5
18.0
10.4
14.5
3.0
7.9
10.6
-
5.0
10.0
15.0
20.0
25.0
114.3
68.9
129.4
53.9
101.0
54.3 60.6 57.6 52.9
68.0
34.6 41.8
366.5
51.1
223.3
59.5 62.9
53.7
41.5
51.2
35.0 29.8
89.3
49.2 56.4 49.7 57.5
37.0 33.1 41.2
-
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
40.1
29.1
144.5
33.2
67.6
42.4
61.0
3.9
21.0
31.2
41.3
31.9
141.6
41.1
74.4
48.6
69.9
3.4
23.9
29.6
42.0
31.3
101.4
43.0
80.1
52.4
59.2
3.1
16.0
32.2
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
2.5
1.8 1.9
1.0
1.8
1.3
1.5
0.7
1.3
1.6
0.8
1.1
5.5
1.0
4.0
1.5
1.7
0.8
1.0
1.2
0.8 0.7
1.5
0.9 1.0 1.2
1.4
0.6
1.1
0.9
-
1.0
2.0
3.0
4.0
5.0
6.0
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015
YE-2013 YE-2014 YE-2015

© 2016 PricewaterhouseCoopers Advisory SpA. All rights reserved. PwC refers to PricewaterhouseCoopers Advisory SpA and may sometimes refer to
the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general
information purposes only, and should not be used as a substitute for consultation with professional advisors.
Portfolio Advisory Group
Richard Thompson
+4420 7213 1185
richard.c.thompson@uk.pwc.com
Jaime Bergaz
+349 1568 4589
jaime.bergaz@es.pwc.com
Austria
Jens Roennberg
+4969 9585 2226
jens.roennberg@de.pwc.com
Bernhard Engel
+4315 0188 1160
bernhard.engel@at.pwc.com
CEE
Jonathan Wheatley
+402 1225 3645
jonathan.wheatley@ro.pwc.com
Cyprus
Stelios Constantinou
+357 2555 5190
stelios.constantinou@cy.pwc.com
Czech Republic and Slovakia
Petr Smutny
+4202 5115 1215
petr.smutny@cz.pwc.com
Denmark
Bent Jørgensen
+45 3945 9259
bent.jorgensen@dk.pwc.com
France
Hervé Demoy
+331 5657 7099
herve.demoy@fr.pwc.com
Finland
Harri Valkonen
+3584 0539 9339
harri.valkonen@fi.pwc.com
Germany
Christopher Sur
+4969 9585 2651
christopher.sur@de.pwc.com
Thomas Veith
+4969 9585 5905
thomas.veith@de.pwc.com
Greece
Emil Yiannopoulos
+3021 0687 4640
emil.yiannopoulos@gr.pwc.com
Hungary
Csaba Polacsek
+36 14 619 751
csaba.polacsek@hu.pwc.com
Ireland
Aidan Walsh
+353 1792 6255
aidan.walsh@ie.pwc.com
Italy
Fedele Pascuzzi
+3902 8064 6323
fedele.pascuzzi@it.pwc.com
Pierpaolo Masenza
+39065 7025 2483
pierpaolo.masenza@it.pwc.com
Patrizia Lando
+3902 66720014
lando.patrizia@it.pwc.com
Vito Ruscigno
+3902 8064 6333
vito.ruscigno@it.pwc.com
The Netherlands
Peter Wolterman
+318 8792 5080
peter.wolterman@nl.pwc.com
Joris van de Kerkhof
+318 8792 7622
joris.van.de.kerkhof@nl.pwc.com
Norway
Lars Johansson
+47(0) 4816 1792
lars.x.johansson@no.pwc.com
Poland
Lukasz Bystrzynski
+482 2523 4228
lukasz.bystrzynski@pl.pwc.com
Portugal
Antonio Rodrigues
+3512 1359 9181
antonio.rodrigues@pt.pwc.com
Romania
Cornelia Bumbacea
+402 1225 3960
cornelia.bumbacea@ro.pwc.com
Spain
Jaime Bergaz
+349 1568 4589
jaime.bergaz@es.pwc.com
Guillermo Barquin
+349 1568 5773
guillermo.barquin.orbea@es.pwc.com
Pablo Martinez-Pina
+349 1568 4370
pablo.martinez-pina@es.pwc.com
Richard Garey
+349 1568 4156
richard.garey@es.pwc.com
Antonio Fernandez
+349 1568 4052
antonio.fernandez.garcia_fraile@es.pwc.com
Sweden
Per Storbacka
+468 5553 3132
per.storbacka@se.pwc.com
Turkey
Husnu Dincsoy
+90 212 376 5302
husnu.dincsoy@tr.pwc.com
Ukraine
Vladimir Demushkin
+3804 4490 6776
vladimir.demushkin@ua.pwc.com
United Kingdom
Richard Thompson
+44 (0)20 7213 1185
richard.c.thompson@uk.pwc.com
Robert Boulding
+44 (0)20 7804 5236
robert.boulding@uk.pwc.com
Ben May
+44 (0)20 7212 3664
benjamin.d.may@uk.pwc.com
Panos Mizios
+44 (0)20 7804 7963
panagiotis.mizios@uk.pwc.com
Marie Dempsey
+44 (0)20 7213 2616
marie.dempsey@uk.pwc.com
Natasha Firman
+44 (0)20 7212 3453
natasha.firman@uk.pwc.com
Christina Zarifi
+44 (0)20 7213 2045
christina.zarifi@uk.pwc.com
North America
Mitchell Roschelle
+164 6471 8070
mitchell.m.roschelle@us.pwc.com
Asia Pacific
Ted Osborn
+852 2289 2299
t.osborn@hk.pwc.com
Chiara Lombardi
+65 623 637 03
chiara.m.Lombardi@sg.pwc.com
James Dilley
+85 222 892 497
james.ha.dilley@hk.pwc.com
Latin America
Nico Malagamba
nicolas.malagamba@br.pwc.com
Japan
Masahiro Komeichi
+81 (0)90 4137 5649
masahiro.komeichi@jp.pwc.com

The Italian NPL market - PWC - June 2016

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie The Italian NPL market - PWC - June 2016

Ähnlich wie The Italian NPL market - PWC - June 2016 (20)

Mehr von Roberto Di Domenico

Mehr von Roberto Di Domenico (9)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

The Italian NPL market - PWC - June 2016