What’s Up With NPLs?
DBRS commentary on Structured Finance in Italy in 2024
The structured finance landscape in Italy for 2024 has shown significant activity, with a slow start in new issuances but notable developments in various sectors. NPL (Non-Performing Loan) securitisations are yet to debut this year, which is not uncommon as these issuances often skew towards the latter half of the year.
The structured finance landscape in Italy for 2024 has shown significant activity, with a slow start in new issuances but notable developments in various sectors. As of the end of April 2024, the new issuance in Italy stood at EUR 1.9 billion, exclusively from ABS (Asset-Backed Securities). This pace picked up in May with EUR 4.3 billion in Italian RMBS (Residential Mortgage-Backed Securities). However, NPL (Non-Performing Loan) securitisations are yet to debut this year, which is not uncommon as these issuances often skew towards the latter half of the year.
Italian NPL servicers have been recalibrating their expectations frequently. Since 2016, DBRS has rated 37 Italian NPL transactions, and servicers have submitted at least one updated business plan for 33 of these transactions. This trend indicates a shift towards more conservative assumptions, factoring in the impacts of the pandemic and rising interest rates. Newer deals are showing less volatility in revised expectations compared to older deals.
Notable New Issuances in 2024
Sunrise SPV 95 S.r.l. - Sunrise 2024-1
Provisional credit ratings assigned on 7 March 2024 included ratings ranging from AA (high) (sf) to BB (high) (sf) across various classes.
Finalised ratings were confirmed on 26 March 2024.
Alba 14 SPV S.r.l.
Issued notes backed by lease receivables to Italian retail and corporate customers.
Provisional ratings assigned on 14 May 2024 were AAA (sf) and A (high) (SF).
Credit and Ratings Outlook
Morningstar DBRS maintains a stable outlook for most Italian structured finance sectors. Here are some key highlights:
RMBS and ABS Consumer Loans**: Both sectors have a stable performance and credit rating outlook.
Near-Prime and Nonprime Loans**: Negative outlook for credit performance but stable for credit ratings.
Commercial Leases and CMBS (Commercial Mortgage-Backed Securities)**: Negative outlook for office and retail sectors, stable for industrial and multifamily sectors.
Structured Credit and NPLs**: Negative performance outlook but stable credit rating outlook.
Economic Indicators and Fiscal Landscape
Italy's economic recovery post-pandemic has been stronger than anticipated. Key economic indicators as of early 2024 include:
GDP Growth**: 0.6% year-over-year (March 2024) and 0.3% quarter-over-quarter.
Unemployment Rate**: 7.2% (March 2024).
Inflation**: 0.9% (April 2024).
Consumer Credit Growth**: 4.0% (March 2024).
Mortgage Lending Growth**: -24.4% (September 2023).
House Price Index (HPI)**: 1.8% (April 2024).
NPL Ratio**: 2.4% of total loans (December 2023).
Recent Upgrades and Downgrades
Morningstar DBRS has made several rating changes in 2024, including:
Upgrades:
Siena PMI 2016 S.r.l. - Series 2-2019 (Class D Notes upgraded to AA (high) (sf)).
BPL Mortgages S.r.l. (Class A Notes upgraded to AA (low) (sf)).
Sirio NPL S.r.l. (Class A Notes upgraded to A (sf)).
Downgrades:
Brisca Securitisation S.r.l. (Class A Notes downgraded to CC (sf)).
Maggese S.r.l. (Class A Notes downgraded to CC (sf)).
ISEO SPV S.r.l. (Class A Notes downgraded to BB (sf)).
Conclusion
The Italian structured finance market in 2024 reflects cautious optimism with a stable outlook across most sectors. The recalibration of business plans by NPL servicers indicates a prudent approach in the face of economic uncertainties. With significant activity in ABS and RMBS, and pending NPL securitisations, the market is poised for a dynamic second half of the year. The overall credit and performance outlook remains stable, underscoring resilience in the Italian financial landscape.
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Relevant Links:
https://dbrs.morningstar.com/research/433450/italys-2024-in-structured-finance-so-far-whats-up-with-npls
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