Prices drifting south in changed environment

Recent NPL market activity

Since the rapid slowdown in NPL transactions during the end of 2019 and first half of 2020, the NPL market in the Nordics has slowly started to remerge during second half of 2020. In the rest of Europe, there is still a large gap in prices between what sellers ask for, and what investors are willing to offer. In the Nordics, there has been a few larger deals closed during this fall and we see a number of smaller deals in pipeline.

In Sweden NPL transaction volumes have increased by more than 600% from 2010 until the peak 2019 (diagram 1[1]). In 2019 NPL portfolios of some 6 BSEK were sold by financial institutions, which was all-time-high.

NPL portfolio prices tend to vary pending on size of portfolio, size of claims (higher price for smaller claims), and age of debt. Older back-book portfolios have a lower price.

Diagram 2 (below) shows that average price has gone up from some 20% in 2010 to 70% in 2018 . A major factor behind price increases is increased competition between NPL investors, and another one is the economic upswing.

The investor perspective

From our investor network, we receive information that there is an increased demand for forward-flow agreements from banks and financial institutions this autumn.

However, since some investors claim that performance has fallen on existing  agreements, they are less willing to pay the prices that sellers are asking for. Investors worry that they buy at too high prices, and sellers that they sell at too low prices, the risk assymetry provides an imbalance in supply and demand.

Investor price risk increases obviously with the risk of COVID19 impacting on collection and performance, even if such impact has yet not been reported.

For the investor the credit policy is key in a forward flow contract, since any changes in credit quality will affect the performance, therefore we recommend that the credit policy always is fixed during the contract period.

Altogether, return requirements, IRR, have increased, and some investors are only willing to invest at 13-15%, while IRR levels were as low as below 10% in 2018.

The Council has several portfolios, both forward-flow and one-off transactions, in NBO stage and we expect to close the first transactions in end of November.

The seller perspective

We would suggest that the market has moved from being a “sellers’ market” to more of a “buyers market” during the course of this year.

The Council has been able to find buyers and lift prices for sellers for forward flow contracts as well as one off portfolios, and we have received bids from investors and buyers that banks normally not have invited in tenders, and we have structured deals to become attractive for each specific investor.

The fact that there is a lack of transparency when it comes to data is a big problem for sellers of NPL portfolios. Sellers most often do not have access to performance data of their portfolio after previous sales, which is a competitive advantage for the incumbent collection provider.

Consequently, we have experienced that bid prices for one specific portfolio can vary with as much as 30% in CAPEX, when investors apply similar return requirements. To mitigate the information gap, The Council performs independent valuations of portfolios, and blue-print data extract in dialogue with investors to increase transparency and competition. The information gap makes it difficult for sellers to evaluate actual price levels offered from different investors, and understand how improved origination impacts NPL collection performance over time.

We have also noted that banks prepare for Prudential Backstop regulations, and we believe that new sellers will enter the market for this reason, which might cause an even increased demand for forward flow agreements.

The benefit of structured deals

We at The Council are in dialogue with large investors who look for structured NPL investments. There are benefits with structured deals for both for the seller and the investor. One benefit is that a structured NPL investment offers the opportunity to widen the investor base, since different investors can co-invest in different tranches of the portfolio, which can facilitate larger transactions at say 50 MEUR or more. One way of structuring a transaction is to mitigate downside price risk and impact on capital requirement for banks. A structured transaction can offer transparency for both investors and sellers, why it facilitates to for the investor to enter into longer duration contracts. There is also an opportunity for the selling bank to invest into their own portfolio, and to take part of the management and performance in collection.

Introducing NPL Markets in Sweden and the Nordics

During this fall 2020 we at The Council have entered a partnership with the digital platform NPL Markets. In early November we have introduced their platform in Sweden and the Nordics to some of the most prominent banks and niche banks. NPL Markets provide a digital market place for NPL sales, with more than 400 investors connected, and can manage clean cut deals, structured deals in an auction, or else in a quiet tender. Apart from being a market place NPL Markets also offers data preparation, analytics, valuation and reporting services. We would be very happy to coordinate such introduction for those who are interested.


About us

The Council was established 2010 and offer advisory services within risk, compliance and governance to financial companies in Europe. Within our new business line, The Council offer investments advisory and broking services to NPL sellers and potential investors. We have access to a network of up to 400 international investors and we manage both traditional NPL sales as well as sales through structuring NPL portfolio investments.

We have gained vast experience from the NPL investments evaluating over a hundred NPL portfolio investment case over the years. We offer a smooth, efficient and anonymous sales process securing best possible commercial terms for your NPL sale.

Jörgen Krigsman                                                                                Mireille Andersson                     

Transaction Manager, Partner                                                          Partner

Mobile: +46 734 00 34 11                                                                 Mobile: +46 706 08 02 14

E-mail:                                          E-mail:

[1] The Council NPL Statistics