Turkish NPL Purchasing Market

Overview and the way forward

  • In 2017, private financial institutions sold TRY 8.6 billion NPLs, in terms of unpaid principal balance (UPB), to AMCs, the highest number since the inception year of 2008

  • We expect annual total NPL sales volume of TRY 9.2-13.7 billion between 2018 and 2020 according to our macro-base scenario

  • Gross loan volume is expected to reach the range of TRY 3.4-3.7 trillion in 2020 from TRY 2.3 trillion in 2017, according to our three macroeconomic scenarios

  • Resulting NPL ratio out of gross loan volume, is expected to increase from 3.0% in 2017 to 3.1%-3.5% in 2020, according to our three macroeconomic scenarios


Since the enactment of the communique governing the foundation and operations of NPL servicing platforms (so-called Asset Management Companies, “AMCs”) in Turkey in November 2006, financial institutions, despite being volatile, have consistently sold non-performing loans (NPL). The NPL purchasing market has experienced considerable growth over the years with the increase in number of banks selling portfolios, entrance of new AMCs to the market, as well as banks selling larger portfolios.
 

Yearly net NPL inflows (TRY billion, 2008-20)




Going forward, we expect to see further growth in the NPL purchasing market in the next few years, driven by several factors: i) overall volume growth in relation to the growing credit and NPL balances; and ii) expectation of state banks to start selling NPLs. In order to estimate the growth in the coming years, we have developed three scenarios in this study based on different macroeconomic assumptions (i.e. expected baseline economic growth, prospering economy with higher growth, conservative economic growth).

 

NPL sales forecasts (TRY billion, 2008-20)

Since 2008, an NPL portfolio with a cumulative total of TRY 37.5 billion, in terms of UPB, has been sold. We foresee that the upward trend in NPL sales will continue in the upcoming years.

 

In summary, we expect the credits and NPL to grow in line with the GDP estimates of the country (similar to prior years), which would yield regular NPL sales by private banks and financial institutions. Hence, we foresee attractive opportunities for AMCs in the Turkish NPL purchasing market.

Contact us

Serkan Tarmur

Advisory Services Partner, PwC Turkey

Tel: +90 212 376 5304

Ozan Cığızoğlu

Strategy Consulting, Director, PwC Turkey

Tel: +90 212 326 6748

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