NPL transactions and NPE stock in Italy

1. April 2020
NPL transactions
and NPE stock in Italy
Flash Update 2020

2. Market Watch NPL _ 2
Executive Summary.
2020 NPL TRANSACTIONS FORECAST NPL AND UTP STOCKS IN ITALY 2020
01 02
1. The NPL portfolios transaction market will continue to be dynamic: € 32
billion of new transactions are estimated, a decrease of only € 5 billion
compared to the previous forecast, due to a downward trend in prices, which
will keep interest high in the investment of well-established operators on the
market, and thanks confirmed of sales plans by large banks.
2. The secondary market will be very dynamic, with an incidence of 26% on
the amount transferred.
3. Uncertainty of the scenario may slow down new investments of operators
with a yet to be consolidated market position and without a platform.
1. The amount of NPE to be recovered could reach € 351 billion at the
end of 2020.
2. After 2 years of reduction an increase of 7% (+€ 23 billion) in the
NPE stock is estimated as a result of NPLs slowdown in the banks'
balance sheets.
SOURCES: Banca IFIS NPL Market Database – Press releases and news – Banca IFIS internal estimate, Banca d’Italia and Unirec
Hypotheses adopted for the forecast analysis: the estimates of this observatory assume a phase 2 with gradual reopening of activities and transactions and a progressive normalization of
the context in 2021.

3. Market Watch NPL _ 3
The NPL portfolio transactions market forecast will be influenced by "push" and
“pull“ factors that will tend to investors with an established position in the industry.
01 02
Tailwind trend Headwind trend
1. Portfolio price reduction trend following the
change in the market scenario will stimulate
interest of investors with a consolidated
position in the sector.
2. Tax incentive for banks and financial
companies to transfer impaired loans (NPL) by
converting deferred tax assets (DTA) into tax
credits.
3. Sale on the secondary market of portions of
securitized portfolios according to the GACS
scheme.
4. New potential bad loan flows in bank balance
sheets due to the increased risk due to the
slowdown in production.
5. Change in the competitive context with some
buyers who are organizing to operate in sharing
mode.
1. A lower propensity to invest in
some Funds, especially foreign ones
without a management platform, as
a result of the greater uncertainty of
the current.
2. The slowdown in the recovery
activity may lead to difficulties in
defining the new business plans.
3. Falling prices may slow down some
divestment projects.
SOURCES: Banca IFIS NPL Market Database – Press releases and news - Banca IFIS internal estimate

4. 19 17
71
66
32
1,2
31
2015 2016 2017 2018 2019 E 2020
Pipeline
Effective
32
Market Watch NPL _ 4
The 2020 NPL transactions could reach a significant amount of € 32 Bn, with
an important boost from the secondary market.
Volume Bn€
• Price reduction trend that will keep the investment
interest of well-established operators high on the
market
• High dynamism of the secondary market
• Confirmation of the disposal plans by some large
originators
• Increased flows of new NPL in bank balance sheets
which will encourage the originators' propensity to
sell
• Potential new UTPs in the second half of the year
following performing loans subject to a payment
moratorium
• Investment slow down foreign operators without
management platform
• Postponement of projects to sell small portfoliosSOURCES: Banca IFIS NPL Market Database – Press releases and news – Banca IFIS internal estimate
#Deals
NPL Transactions - Bn€ and Percentages
% Secondary 26%31% 51% 4% 2% 17%
2020 FORECASTS DRIVEN BY:
COMPARED TO THE PREVIOUS ESTIMATE,
THE REDUCTION OF ALMOST € 5 BN IN 2020
TRANSACTIONS DETERMINED BY:
43 50 64 83
88
12
45

5. - 0% 1% 53% 24% 25% 20% 23% 20% 8% -1% 3% -3% -5% 7%
47 47 42
59
78
107
125
156
184
201 201
167
100
72 61
29 28 33
57
66
74
91
109
131
127 117
94
79
64 72
1 2
2
2
2
3
4
8
20 28
94
154
176 195
10
15
22
76 76 77
118
146
183
219
269
323
348 346
355
343
327
351
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 E 2020
Banks Bad Loans Banks UtP NPL Volume Transactions UtP Volume Transactions Total Italy
Market Watch NPL _ 5
In 2020, the NPE stock to be recovered is estimated to start growing again at € 351
Bn, returning to 2017 levels, because the NPE in the banks' balance sheets slows down
its decline.
In the second
half of the year
the effectiveness
of the payment
moratorium
could impact the
impaired stock
Total Italy gross NPE (past due excluded) – Bn€
Annual
variance %
SOURCES: Banca IFIS NPL Market Database – Press releases and news – Banca IFIS internal estimate, Banca d’Italia and Unirec

6. Market Watch NPL _ 6
This publication is edited by Banca IFIS.
The information contained herein, obtained
from sources believed to be reliable by Banca IFIS,
are not necessarily complete, and their accuracy
cannot be guaranteed. This publication is provided
merely for purposes of illustration and information
and does not in any way represent financial and
investment advice.
General Statement.

7. Market Watch NPL _ 7
April 2020
NPL transactions
and NPE stock in Italy
Flash Update 2020