In 2022, we saw €183,0M worth of loans on our platform (10% less than in 2021), with €11,8M produced in December. Estonia was the best performing market in terms of volume, in December (€5,3M), and also in 2022 overall (€69,2). Finland followed with €2,2M (€22,0M for the last two years), while Latvia produced €23,6M (annual growth of 19%) in 2022 and €2,0M in December. The Lithuanian yearly volume was the same at €34,5M (including €2,0M in December) and German origination dropped over two times to €33,7M (€0,2M in December), as a full team change took place and we adopted a more conservative approach.
Repayments in December amounted to €8,2M. The average return was 8,9% with a total of 62 loans (including stage loans) repaid. The total repayments in 2022 were €12,7M lower than in 2021, at €104,7M, with average yearly returns remaining around 9,5%.
The default rate has increased significantly when compared to the beginning of 2022, due to new defaults in Germany and Finland. German and Finnish default and late projects received the most attention last year. We have halted new German loans for the time being, and implemented changes at the managerial level to reorganize the business.
With the real estate market slowing down, we have implemented a more aggressive approach towards problematic borrowers. This is especially true in Germany, where borrowers are quick to provide exit dates, but in most cases fail to fulfill them. Some of our German borrowers have cited our operational changes as an excuse not to pay their debt, and we have consequently begun selling the claims. We are now very close to finalizing the first transaction. In Finland, the secured claim market is not as advanced and we therefore need to contend with legal battles with hostile borrowers during enforcement proceedings.
Recoveries during 2022 were exceptional – in total €10,5M worth of principal was recovered (€6,7M in 2021). The most successful cases came from Finland and Sweden where 3 long-term defaults were recovered (€6,0M). Exits have not yet been finalized in Spain (in the largest default case in Spain, despite partial payment and notarized transaction, final payment was not received from the buyer due to financing issues) or in Germany (a couple of claim purchase deals fell through at the last minute due to legal obstacles). However, we have found the right partners (specialist lawyers, debt collection firms, non-performing loans purchasers) in every market we operate in, which will contribute to an increase in recoveries in 2023.
We expect the default rate to further increase in the coming months, before dropping in the third quarter of 2023. Our goal is to to reduce the default rate to below 5,0% in the Baltics and below 15% in other markets, by the end of the year. We anticipate that there will be more delays in the sales of new apartments, while the overall real estate market transaction volume will decline at least 20%. We also expect that bank financing will be limited to only the strongest market players.
As part of our efforts to constantly improve our internal processes and systems, we made a significant change to our debt collection team at the start of 2023. Specifically, the traditional debt collection specialist was replaced with a second default lawyer to increase the strength of our litigation team. Our current external default lawyer is also being changed in Germany. A more target-oriented approach to debt collection is being implemented across the group which will see increased debt claim sales and also workouts with private investors who are looking for problematic, high yield cases to invest in.
|As of 19.01.2023|
|Total financed loans since 2014||€682,5M|
|Total repaid loans since 2014||€389,5M|
|Total outstanding portfolio||€293,0M|
|Total outstanding defaulted loans||€63,5M|
|Total number of outstanding defaulted loans||181|
|Default rate (outstanding loans)||21,2%|
|Partially recovered loans rate (outstanding loans)||2,8%|
|Default rate (total financed loans)||9,3%|
|Total amount of recovered loans (including partially)||€25,1M|
|Total number of fully recovered loans||141|
|Average return rate of fully recovered loans||9,0%|
|Prolonged loans (outstanding loans)||€68,7M|
|Prolonged loans rate (outstanding loans)||23,4%|
|Average time from default to recovery||12,0 months|
|Write-off rate (total financed loans)||0,006%|
We will keep you informed about the credit portfolio quality on a monthly basis.