Non-performing loans (NPLs) remain stable in European economies where the European Bank for Reconstruction and Development (EBRD) operates, despite persistent macroeconomic and geopolitical pressures over the past year, according to the new edition of the NPL Monitor, published today.
The latest data suggest that the NPL landscape in central, eastern and south-eastern Europe (CESEE) remains resilient, with stable volumes and ratios.
Despite the challenging macroeconomic environment, NPL levels remain at a historic low, with the average NPL ratio for the region standing at 2.08 per cent. NPL volumes in the region have declined marginally, falling by 1.2 per cent year on year to total €27.6 billion as at June 2024.
According to the report, the decline in NPL volumes is being driven primarily by general improvements in credit conditions and the resolution of NPLs by banks.
“While short-term pressures persist and pockets of credit risk are beginning to appear, these are still only having a marginal impact on new NPLs,” the report notes.
NPL transactions remained subdued across the CESEE region at the start of this year, with activity driven by primary sales in markets such as Poland and Romania, with only Greece experiencing significant growth in secondary NPL sales.
Ukraine remains an outlier with an NPL ratio of 34.6 per cent, largely owing to the ongoing war. However, recent reforms, including partnerships with the International Finance Corporation, are aiming to strengthen the country’s capacity to resolve distressed loans and attract private investment.
Despite these positive trends, the report notes early signs of credit risk in sectors such as real estate and lending to small and medium-sized enterprises. Higher borrowing costs and constrained disposable incomes could exacerbate challenges for already strained sectors and further contribute to rising corporate default rates. European regulators, including the European Central Bank, have called for increased vigilance, with credit risks expected to remain a supervisory priority in 2025.
This half-yearly report tracking NPLs is prepared by the EBRD as part of the European Bank Coordination Initiative or “Vienna Initiative”. The NPL Monitor is published on the Vienna Initiative website in tandem with a partner publication prepared by the European Investment Bank (EIB), the CESEE Bank Lending Survey, also issued today.
The Vienna Initiative was established in 2009 during the global financial crisis to safeguard the financial stability of emerging Europe by bringing together banks, governments, regulators and international financial institutions.