“KPMG was involved in many of the leading loan portfolio sales during the past year in Belgium as sell-side or buy-side advisor. Belgium is an attractive market for investors due to its transparent legal framework and concentration of exposure.” – Peter Lauwers, Partner, Head of Advisory, KPMG in Belgium
Loan sale activity in Belgium has been limited to date, with only three transactions closing in the past year. Two of the three transactions were part of the ongoing wind-down of well-seasoned securitisation structures in Belgium, and were a mix of performing and non-performing residential mortgage portfolios.
One transaction occurred due to the decision of Optima to return its banking license in Belgium. This resulted in the sale of a performing residential mortgage portfolio in February 2015 of €160 million.
The effects of the 2008 financial crisis were clearly felt in Belgium, as the country‘s banking sector underwent large-scale restructuring, with government intervention necessary in order to protect consumer deposits. However, Belgium’s economy has been improving and stabilizing since then, with GDP growth in 2015 at 1.4 percent.
The Belgium banking landscape is dominated by four banks: KBC, BNP Paribas, ING and Belfius. Due to strict underwriting criteria there is a low percentage of NPLs on their balance sheets. Belgian real estate prices have also been stable during the financial crisis compared with other neighbouring countries.
Loan portfolio sales in Belgium have been limited to date given the low percentage of NPLs in the Belgian banking system. However, pressure on margins due to thelow interest rate environment provide opportunities for smaller asset managers and foreign banks in Belgium to sell off portfolios with healthy yields at small discounts to par.
The definition of NPL has been expanded under the new solvency rules implying higher capital requirements. These higher capital requirements provide an opportunity for financial institutions who may look to dispose of these assets from their balance sheets.