This note:
• updates to 2022 the estimated bad loan recovery rates already published in previous issues of the Notes on Financial Stability and Supervision starting from 2017.
• illustrates the results of the yearly survey on NPL sales, conducted by the Bank of Italy starting from 2016.
The analysis reached the following main conclusions.
The reduction in the stock of bad loan positions
- In 2022, bad loan positions amounting to around €22 billion were closed (i.e. derecognized from banks' financial statements). This amount, which is around four times higher than that of newly-classified bad loans, exceeds that recorded in 2021 both in absolute terms (€17 billion) and as a percentage of bad loans outstanding at the end of the previous year (64 per cent, against 42 per cent).
- The increase compared with 2021 is mainly attributable to sales on the market (from €14 billion to €18 billion), while the amount of bad loans closed through standard procedures remained stable compared with the previous year (€4 billion).
- The improvements underway since 2015 in the time necessary to dispose of bad loans are continuing, benefiting from both the reduction in the stock of bad loans due to lower inflows and the progress achieved by the banks in the management of these loans. The share of the number of positions closed within one year of their classification as bad loans increased progressively (from 38 per cent for the positions entered in 2015 to 65 per cent for those entered in 2021). Moreover, the latest data indicate that 85 per cent of the positions are closed within three years of their classification as bad loans.
- Compared with previous years, recourse to securitizations in relation to total sales decreased, also owing to the fact that the guarantees on the securitization of bad loans (GACS) are no longer available since 14 June 2022. The GACS assisted all the main securitization transactions (€5.4 billion, i.e. 82 per cent of securitized bad loans).
- The amount of loans classified as unlikely-to-pay sold on the market was €7 billion (€5.7 billion in 2021).
Recovery rates of bad loans closed
- Compared with 2021, the average recovery rate increased for the positions sold on the market (from 29 to 32 per cent) as well as for those closed using standard recovery procedures (from 45 to 47 per cent).
- The average recovery rate for bad loans secured by collateral was equal to 40 per cent, higher compared with 2021 (38 per cent) due to disposals, whose recovery rate moved from 34 to 38 per cent. For the unsecured positions, the average recovery rate was 27 per cent, increasing compared with the previous year (25 per cent), both on bad loans sold to third parties (from 22 to 24 per cent) and on those closed using standard recovery procedures (from 35 to 42 per cent).
Disposal prices of non-performing loans
- The price of the bad loans sold in 2022, calculated on the basis of the annual survey conducted since 2016 on a very large sample of transactions, was equal to 21 per cent of the gross book value at the time of the sale, slightly higher than 20 per cent recorded in 2020. The increase, as already highlighted for the corresponding recovery rate, is attributable to both bad loans secured by collateral, for which the price increased to 32 per cent (29 per cent in 2021), and unsecured positions, whose price increased to 12 per cent (11 per cent in 2021).
- The sale price of non-performing loans other than bad loans was equal to 34 per cent, 6 percentage points down from the value observed in 2021, due to the lower share attributable to the secured component.
