Debt Explorer | As banks in the UAE and Saudi Arabia are being encouraged by their respective regulators to take a more rigorous approach to booking and disclosing NPLs, new investment opportunities are opening up to global investors

Debt Explorer | The sukuk market is keeping a close watch on a proposed set of Sharia guidelines that could significantly change how sukuk instruments are structured and distributed

Elevated interest rates have led to an increase in European NPL volumes, but levels remain far below the peaks during the financial crisis period. NPL investors and servicers are rethinking their business models to adjust to a smaller market

Debt Explorer | Demand for covered bonds is rising as investors seek opportunities to deploy capital in low-risk assets during a period of market uncertainty

Debt Explorer | State-owned funds continue to be active players on the global dealmaking scene, despite the market downturn

The ongoing decline in NPL volumes in 2022 and pivot towards smaller disposals leave European lenders well positioned to withstand adverse economic conditions.

Declining NPL ratios have put banks in a somewhat more comfortable position than they were this time last year, but the threat of macroeconomic hardship looms over borrowers.

Total NPL volumes across Europe are down and ratios remain stable, with countries such as Italy and Greece having worked especially hard to deal with toxic assets. Even with economic growth set to slow, banks have reason to be broadly optimistic about their NPL levels.

Despite broad economic turmoil, countries across Europe have so far avoided recession. Banks have been able to catch their breath with the NPL market shrinking steadily post-pandemic. But looking forward, Europe is hardly anxiety-free.

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The European non-performing loan landscape looks very different in 2022, with large deals driven by urgent government regulation supplanted by small but steady opportunities.

What does the future hold for NPLs? There's still plenty of business to be done, but buyers and sellers alike will need to change tack to get the most from the available opportunities.

Europe's banks continue to defy expectations—not a single country saw its banking sector’s NPL ratio increase in 2021, with the vast majority reporting an improvement.

While the spike in bad debt and subsequent tsunami of NPL and non-core loan deals that was anticipated due to COVID-19 did not materialise, the increasingly volatile market trends may lead investors to discover new and unexpected opportunities.

We highlight the key European M&A trends in the first half of 2021, and provide our insights into the outlook for M&A moving forward.

Financial institutions M&A sector trends: specialty finance/marketplace lending — H1 2021 and outlook for H2 2021

European non-performing loan trends in a post-COVID-19 world

Where will the European NPL market go from here? A lot depends on vaccine rollouts and the end of debt relief measures. For many, that will be their first chance to assess the damage and plan ahead.

Opportunities for NPL investors are presenting themselves in European jurisdictions outside of the largest markets: Italy and Greece. Here is an assessment of markets where new opportunities for NPL deal flow are emerging.

Early in 2020, as the pandemic took hold, the European NPL market went into lockdown along with the rest of the economy—but as the market opened up in the second half of the year, NPL sellers jumped back in, setting the stage for a busier 2021.