May 2011, Issue 12
Asia’s outlook for non-core and non-performing loan portfolios
Welcome to the latest edition of NPL Asia newsletter. This is the 12th edition of this publication. You will note that we have given it a refreshing new look and name. In this issue, we continue to share our insights into the Asian non-performing loan (NPL) markets.
Since our last issue, the global financial markets have continued to be affected by sovereign debt crises, bank bail outs, soaring unemployment levels and staggering levels of public debt. However, Asia has continued to grow and have come through the global financial crisis relatively unscathed, with the exceptions of Korea and Japan.
- In Korea, the NPL market has been active over the past 18 months, with NPL portfolios with a combined face value of over US$5B hitting the market in 2010.
- In Japan, we only see an active market for buyers of NPL’s particularly in commercial real estate and sales of legacy Lehman’s portfolios.
- In Taiwan and Thailand, there continue to be a constant source of deal flow. However, in Taiwan’s case the market is largely a locally driven one where there are many local buyers targeting the local selling banks.
- In Australia, we see an uptick in debt sales of single credit sales and unsecured retail NPL but there has only been one portfolio sale of corporate loan over this period. We expect the sale to continue as banks continue to clean up their books and buyers return.
- In India, NPL portfolio sales market continues to develop and 2010 saw 19 transactions taken to market with varying degrees of success.
- In China, the growth of lending over a very short period of time is likely to lead to an uptick in NPL’s in the near future. However, our discussions with local regulatory bodies suggest that any NPL’s in state controlled banks that are comprised of loans to local Chinese entities will only be sold to local asset management company buyers i.e. Chinese buyers. Whereas loans to foreign organisations may be sold to foreign buyers, however, Chinese banks have not been as prolific in lending to foreign organisations as they have been to local organisations.
- Buyers have largely been looking at the primary market for deals rather than the secondary market. However, we are also starting to see buyers looking at newer markets (e.g. Middle East and Pakistan) for opportunities.
