An in-depth look into how the loan sale market performed in 2015 in Croatia.
“We expect an increase in the number of transactions in the medium term driven by subsidiaries of international banks, following some successful portfolio sales in 2015.” – Goran Horvat, Partner, Head of Financial Services and Restructuring, KPMG in Croatia and Bosnia-Herzegovina
2015 saw another portfolio sold in Croatia, the €217 million ProjectJanica. This follows one of the first loan sales in Croatia, which was the €61 million portion of Project Dinara with borrowers in Croatia.
One of the first loan sales in Croatia, Project Dinara, was part of a Balkans portfolio sold by Hypo Alpe Adria. B2 Holding has been the most active investor in Croatian loan portfolios to date, having acquired both Project Dinara and is in the final stages of closing the larger €217 million Project Janica transaction sold by Erste & Steiermärkische Bank.
Croatia joined the European Union in July 2013, leading to a number of ongoing changes in the financial and legal systems to bring them in line with EU standards.
Croatia’s banking sector is highly concentrated and is dominated by foreign banks, notably the subsidiaries of large banking groups of Italy and Austria.
Croatian commercial banks are expected to start deleveraging the remainder of their NPL portfolios in 2016, and bring them to market in the coming years. Additionally, four of the five largest banks in Croatia are subsidiaries of large multinational banking groups in Italy and Austria, and they in particular are expected to further deleverage as their parent banks look to recapitalize and dispose of their problem loans.
We expect investors to view Croatian loan sales with more positive sentiment with the new Croatian Bankruptcy Act in force, as it addresses some of the primary concerns of investors in regards to enforcing on Corporate and SME loans, namely the complicated court process and long time frame to resolution which had previously resulted in an enforcement time of up to five years.
As the tourism industry continues its strong growth, Croatia has experienced increased demand in real estate, particularly along the coastline and in leisure and tourism-oriented properties. This interest has resulted in increased invest or interest in primarily real estate-focused loan portfolios.