European NPLs: Emerging from the COVID-19 Pandemic

In this commentary, we lay out our rationale for removing any remaining adjustments to expected performance in our analysis of European nonperforming loan (NPL) transactions secured by retail and hospitality properties.

Summary highlights include:
-- An overview of the performance trend of European NPL transactions observed since the onset of the Coronavirus Disease (COVID-19) pandemic and
-- An analysis of the evolution of the servicer´s expectations compared with the executed business plans.

“The data confirms that, for transactions rated up to 2019 (pre-pandemic), the recovery ratios have generally continued to deteriorate but at a slower pace compared with the previous year, save for a few exceptions. DBRS Morningstar also observes an overall slowdown in downward revisions to business plans in terms of amount of gross proceeds initially estimated by the servicer and the latest updated business plan forecasts”, stated Clarice Baiocchi, Assistant Vice President of European Structured Finance Surveillance at DBRS Morningstar.