Servicer of the Year (NPLs) — Prelios
Regulatory pressure has led to over €70bn of non-performing loan transactions from Italian lenders during the last few years, shaking up the servicing business. Prelios has been at the front of the pack from the start and is our Servicer of the Year, after a 2020 in which it began the industrialisation of unlikely-to-pay servicing, built out the first Italian non-performing exposures digital marketplace, and delivered market-leading financial performance.
“The ability to innovate is the leitmotif of our history,” says Fabio Panzeri, CEO of Prelios Credit Servicing and General Manager Servicing and Operations at Prelios Group. Prelios was the first and fastest servicer to get into the GACS (Garanzia Cartolarizzazione Sofferenze) market when the Italian government introduced the NPL securitization guarantee scheme in 2016, and now boasts a market share of about 35%.
Its financial results in 2020 were, in the context of the Covid-19 crisis and the subsequent closure of the courts system, extraordinary. Panzeri says that’s because it takes a very different approach to its peers.
“Where other servicers see themselves as an outsourcer of a legal process, we perceive ourselves as a partner of the investor,” he says. “We have a very strong focus and manage the team around collections. When the courts were closed, we identified and contacted borrowers that would be open to amicable agreement and when the courts opened again we were ready with a plan.”
That focus meant that while for other servicers, collections fell during the pandemic, Prelios was able to report some of its best-ever months and contributed to a record result at the group level. Consolidated revenues rose to €241m in 2020 from €161m in 2019, and consolidated Ebitda more than doubled at €106m, beating even its pre-Covid forecasts.
The year also saw Prelios turn its attention to UTP loans, a segment that was ripe for what Panzeri calls “industrialisation”. Previously considered too complex to be managed in large volume, Prelios partnered with Intesa Sanpaolo to build a machine to manage these loans at scale, finalising a 10 year strategic partnership in November 2019.
In the first stage, it took on servicing for approximately €10bn gross portfolio, in addition to an agreement on forward-flows. Prelios hired 170 people in 2020 for its UTP business – which is more than tenfold the people working on the segment at any of its private-sector competitors.
It has also been at the fore of developing technological solutions to Italy’s – and Europe’s – glut of non-performing exposures, with its BlinkS digital marketplace developed being recognised by the ECB as the type of platform necessary to make NPEs more liquid. BlinkS links buyers with sellers across the entire NPE transaction, by providing transparency, standardising processes, reducing costs, eliminating information asymmetry, and widening the pool of buyers and sellers.
“We’ve had endorsement from ECB and from the Bank of Italy, too, but even though it’s still in its early days we very much believe in the platform to bring liquidity – and as we do that for credit servicing, we could also do it for UTPs, tax credits, overdue invoices or distressed real estate,” he says. “There are plenty of markets to which we’re adjacent that could benefit from a more standardised and transparent marketplace, which makes BlinkS an exciting fintech opportunity.”
Innovation remains at the centre of Prelios’ strategy. “Given the Italian economic fabric, the next wave of UTPs will involve a significant number of SMEs. This will pose new challenges to servicers and technology will play a pivotal role in allowing efficient management at scale,” he says. “For instance, we are exploring advanced analytics applied to strategy definition and prioritization, or 24/7 omnichannel interactions with borrowers supported by chat/call-bots and online payment apps.”
Prelios also stands out for its integrated approach to alternative asset management, which is highly sought after by investors. “We can bring together our credit servicing capabilities with our real estate capabilities, which makes us better at finding value and proposing strategies that can extract more from the underlying collateral,” says Panzeri.
An example is the firm’s push to launch direct lending solutions in both the distressed and RE markets. “It means that companies that are in a distressed situation have the opportunity to relaunch themselves. Because we’re good at managing NPLs and UTPs, we’re also good at identifying and sourcing opportunities for clients with capital to deploy.
“Managing NPEs has a critical social impact: the measure of how well we perform our role as servicers is how many companies we can help to return to a situation of financial equilibrium.”