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Money for old rope

By Jon Hay
09 Nov 2020

Weather prophets in Europe’s capital markets can feel a chill coming — banks’ loan books may wither on the vine. A few people — and firms — will be in their element.

Alantra, the Spanish — sorry, global — investment bank has grown up on a diet of risk transfer securitizations and advising on non-performing loan sales. It would be wrong to suggest it had hoped for a crisis, but as its curious slogan “Possibility is in the ascent” suggests, Alantra is feeling quite comfortable with the present outlook.

That’s partly because it has raised its army for the coming war already. Alantra bought KPMG’s portfolio solutions group two years ago, adding 35 professionals to its own 40 to create a team that has advised on several of the largest NPL portfolio sales of recent years.

If the firm has the gift of foresight, observers can take heart from its most recent hire. Alantra is staffing up not in NPLs, but in performing credit. Lacking a balance sheet, it is trying a new approach: replicating the Rothschild equity and debt advisory model for securitization. It will insert itself between issuers — mostly specialist lenders — and investment banks. Just wait for those banks to start griping…

Let’s hope Alantra’s right and the European Central Bank is wrong. The ECB’s chair Andrea Enria is at it again — preaching the gospel of EU Bad Bank to anyone who will listen.

Alas, it looks more likely that the ECB is one step ahead of the banks. All remains quiet on the European banking front — the NPL ratio was actually lower in June than a year ago. Banks including BNP Paribas, Société Générale and UniCredit put out encouraging results this week, without big loan writedowns.

But that trend seems unlikely to continue when large swathes of the economy have next to no revenue.

As NPL aficionados know, a good brew takes a few years of steady decay to mature, so the big vintages may come in 2022 and 2023. That means there’s time — just — to get the equipment ready.

The European Commission will publish a comprehensive NPL strategy next month . It looks like Enria may be helping smooth the way for it to include an EU asset relief programme, or an EU-backed network of national ones. Vehicles would buy bad loans from solvent banks, using a standard rulebook on pricing. New bond issuers with the EU’s guarantee could result.

But experts in policy and NPL sales see a forest of difficulties, political and technical. Even Enria admits the scheme will not do the one thing that could really help in a severe crisis: pool risk at the EU level.

Meanwhile, Credit Suisse has been continuing a reorganisation, hiring two managing directors in EMEA leveraged finance and putting its co-head of debt capital markets, Khalid Krim, in charge of investment grade capital markets, EU — a position designed to make the firm Brexit-proof.

JP Morgan has found it can spare one of its three EMEA levfin origination co-heads — Stefan Povaly is going to become country head for Germany, amid a welter of other internal moves.

One unexpected shift: Niamh Staunton, a managing director in financial institutions DCM at Morgan Stanley, is leaving to become the new treasurer of BP. Kate Thomson, the incumbent, has got a bigger job as chief financial officer for parts of BP’s operations. Gary Admans, BP’s head of capital markets, who runs its bond funding, remains in post.

By Jon Hay
09 Nov 2020