On 30 Nov. 2023, Resurs Bank AB (publ) announced a partnership with credit management company Lowell (Garfunkelux Holdco 2 S.A.) to securitise SEK 1.3bn of Resurs Bank's net non-performing loans (NPLs), or 39% of net NPLs as of 30 Sep. 2023. This results in proforma net NPLs as a share of net loans decreasing to 5.1%, compared with 8.2% as of 30 Sep. 2023. The aim of the transaction is to reduce the future impact of the EU's NPL backstop regulation on Resurs' capital ratios (see related publications (ii)). Consequently, the announced capital relief of SEK 900m refers to a reduction in the maximum negative capital impact due to the backstop regulation over the period up to mid-2026.
Under the transaction, Resurs will sell the loans to three special purpose vehicles (SPVs), owned by the bank, which will be funded by one senior loan from Resurs (90% of total volume) and a junior loan split between Lowell (9.5%) and Resurs (0.5%). The structure is designed to qualify under the regulatory definition of significant risk transfer, with most of the risk being transferred to Lowell.
The balance sheet and income statement effects (estimated at SEK -171m) for Resurs will be seen in the bank's report for the fourth quarter of 2023. The initial impacts on capital from the reduced NPLs will likely be reported from the first quarter of 2024 and continue through 2026. Our pro forma adjustments to Resurs' Q3 2023 results include a positive net profit effect of SEK 50m related to the recently reversed fine from the Swedish financial supervisory authority (see related publications (i)). Due to the costs related to the transaction, the initial effect on capital ratios is limited in the short term. We expect that the risk exposure amount will now grow more slowly than it would have without this transaction, and we consider it positive that Resurs was able to offload the impact of the NPL backstop, despite the currently difficult NPL market.
Related publications
i) Resurs Bank AB (publ) 'BBB' long-term issuer rating affirmed; Outlook stable, publ. 23 Mar. 2023
ii) Nordic non-performing loans set to accumulate if COVID-19 continues unabated, publ. 18 Oct. 2020
This commentary does not constitute a rating action.
Contacts:
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com