MILAN (Reuters) - Polish debt collector KRUK (KRU.WA) targets increasing bad loans under management at its recently acquired debt recovery company in Italy, Agecredit, by nearly eight times to 3 billion euros (2.6 billion pounds) by 2021.
The Italian market for soured loans, Europe’s biggest, has attracted strong interest from international investors in recent years as regulatory pressures forced banks to sell these assets at a discount.
KRUK wants to develop a debt servicing business for third parties, building on last month’s acquisition of Agecredit, which manages 400 million euros of bad loans mainly on behalf of banks.
KRUK estimates debt recovery services in Italy generate an annual turnover of 800 million euros.
Agecredit will target so-called ‘unlikely-to-pay’ (UTP) loans - not yet in default but which banks are unlikely to recover in full, its new chief executive, Alessandro Scorsone, told a media briefing on Wednesday.
Agecredit currently employs 68 people and Scorsone, who is also KRUK Italia’s head of strategic transactions, said the group would look to at least triple their number over the next two to three years.
KRUK bought its first Italian portfolio in 2015 and it currently owns a gross 2.8 billion euros in bad loans for an investment of 140 million euros. In 2016 it also bought a small local debt servicing firm to recover the loans it buys.
Italian banks have offloaded 75 billion euros’ worth of defaulted loans over the past couple of years, but they still hold 100 billion euros in UTP loans. Unlikely-to-pay loans are harder to sell because they have a much higher net book value than bad debts - so a sale would entail a bigger loss - and also because banks usually have ongoing commercial relationships with borrowers.
Scorsone said banks would find it more efficient to concentrate their recovery efforts on larger loans and outsource the management of smaller UTP loans, which are estimated to account for up to 20 percent of the total.
“We want to focus on unsecured small tickets, both retail and corporate,” he said.
Major hedge funds are betting on Italian mid-tier banks as they shed billions of euros in bad loans.
Tomasz Kurr, director general of KRUK Italia, said the group, which traditionally targeted mostly consumer loans, wanted to tackle more corporate loans.
“We think the corporate wave is coming ... we’re putting in the network to be there,” he said.
A fresh focus on corporate loans was also behind last month’s joint-venture deal between Intrum Justitia (INTRUM.ST), a Swedish debt collector specialising originally in consumer debt, and Italian bank Intesa Sanpaolo (ISP.MI).
On Tuesday Banca IFIS (IF.MI), an Italian bank specialising in recovering unsecured consumer loans, said it had agreed to buy rival FBS to expand its business into corporate and secured loans.
Reporting by Valentina Za; Editing by Susan Fenton