Italian Nonperforming Loan Securitisations Performance—2023 Update

This commentary analyses the performance of Italian nonperforming loan (NPL) transactions publicly rated by DBRS Morningstar. It is based on the latest available information provided by the servicers and identifies key trends in the Italian NPL market, along with peculiarities observed at the transaction level based on deal-specific aspects.
Highlights include the following:
-- Performance is slowly recovering from the disruptions caused by the Coronavirus Disease (COVID-19) pandemic.
-- The shift observed during the height of the pandemic from judicial towards amicable strategies and portfolio sales to support performance ratios, is slowly reversing.
-- The levels of conversion of collections into senior repayment varies across the rated transactions and is a key driver of the notes’ amortisation speed.
-- The sharp increase in interest rates observed in recent months will play an important role in the coming quarters and could widen the gap between well and worse performing transactions.

“The inflationary environment and sharp increase in interest rates pose a clear risk to the short- and medium-term performance of Italian NPL securitisations. We observe that performance ratios seem to have stabilised and adjusted to lower levels during the last year and we expect the risks arising from the current macroeconomic environment to be mitigated by the liquidity buffers and the hedging agreements in place,” said Clarice Baiocchi, Vice President, European Surveillance at DBRS Morningstar.