Portfolio Classification and Data Tape: valuable tools to optimise the collection of non-performing loans
The problem of non-performing loans (NPLs) is a very topical one which, given the ongoing economic and financial crisis, affects the balance sheets of Italian and European banks, credit institutes, investment funds and, in general, the many operators on the international financial market.
The current situation in Italy, with bank debts estimated at around €350 billion, has long provoked warnings from the ECB, which has called on all institutions to draw up plans to eliminate and monetise bad debts.
The balance sheets of banks are increasingly weighed down by the presence of NPLs that are classified as unrecoverable, forming losses that, in some cases, can slow down or block the institutions’ business. On the other hand, the unpredictability of bank bad debts not classified as losses can be another element of uncertainty, in a situation that is already very precarious and, indeed, penalising for banks in the regular day-to-day running of their financial activities.
Managing non-performing loans: the role of Originators and Investors
Almost every institution with non-performing loans chooses to sell them to third parties, generally investment funds, who purchase them for less than the total amount of the debt. In this scenario, the initial entity that accumulated the debts, called the “Originator”, builds a homogeneous loan portfolio that is sold to an investment fund, called the “Investor”, which aims to achieve payback through effective debt collection operations.
The greater the information, the sounder and more advantageous any operation between an Originator and an Investor. A debt portfolio well described by the selling company – regarding which, for example, various investigations on the debtors and on the estimated debt collection rate have already been carried out – may have a greater appeal for an investor who, first and foremost, is seeking guarantees and an acceptable level of safety.
Even for debt portfolios that have already been sold and are held by the parties who plan to conduct debt collection operations, analyses and investigations are the professional means of achieving payback more quickly and effectively.
Ponzi SpA and Due Diligence
Ponzi SpA has more than 50 years’ experience in financial investigations aimed at obtaining key information for debt collection purposes. Evolving international financial scenarios have led Ponzi SpA to specialise in the delicate Due Diligence sector linked to the classification of non-performing loans. In this case, the company acts as a Special Servicer, drawing on its dedicated operating procedures and on highly-qualified profiles selected and trained by Ponzi SpA in line with a company philosophy that strives for perfection.
At Ponzi SpA, due diligence is the meticulous, precise operation of finding information to be entrusted to the customer so as to draw up the Data Tape connected with a loan portfolio. The personal, corporate and financial-capital information on debtors in a portfolio is a fundamental decision-making tool. Turning to a Special Servicer like Ponzi SpA may extend the chain of interlocutors and rise the overall costs, but it ensures a higher level of professionalism, offering the investment fund greater guarantees of collection and having positive effects on the sale price of a loan portfolio for financial institutions.
Investors who turn to Ponzi SpA to conduct due diligence operations on acquired portfolios enjoy similar advantages. At this stage, data and data analysis are equally crucial in order to plan and implement debt collection.
Debt collection can be extremely time consuming, complex and variable. Its effectiveness depends on the possibility of getting to break-even point first, and then obtaining the desired profits.
Again, managing and planning debt collection operations internally and independently is clearly cheaper, but it is only through expert professionals that you can be guaranteed optimal results.
For years, Ponzi SpA has been the go-to partner of banks and financial institutions wishing to dispose of their non-performing loan portfolios quickly and favourably. The company provides services and tools to provide a detailed overview of debtors, their assets and their financial situation. This information is also a good basis for choosing the most effective tools for initiating debt collection operations by purchasers of NPL portfolios.