PBK to sell off zl. 68 million in lost, doubtful loans
While the bank has sold off bad debts before at auction, this sale will be its largest to date and represents about 40% of PBK's lost and doubtful debt portfolio (according to Polish accounting standards, shaky loans are classified as sub-standard, doubtful and lost).
The bank has also chosen to sell through negotiations with potential purchasers rather than through straight auction to the highest bidder, which gives them more flexibility in setting the price and payment terms.
"There's no sense in trading one debt for another one," said Cezary Kostrzewa, vice-director of collections. "This method gives the process more elasticity. And lately it seems that most banks are moving to this form of negotiations where you can work out details in discussions."
For the bank, the main reason for selling off its bad loans is to get a certain percentage of its money back. "This is the principal goal," said Collection Department Director Tomasz Zason. "Either you can get it back from the debtor who, frightened by seeing his name in the paper, agrees to some way of paying it off, or by selling it to somebody else."
Cleaning up its loan portfolio will also help the bank improve its profitability. According to Gazeta Bankowa's rating of Polish banks, 29.4% of PBK's loan portfolio is taken up by "irregular" loans, with 17.9% classified as lost. Their return on assets was 3.2%.
"As the name suggests, assets (aktywy in Polish) should be active," Zason said, playing on the root of the Polish word. "They should bring in profits. What we're selling are non-profitable assets."
But as the saying goes, one man's trash is another man's treasure, and the bank is counting on a lot of interest from investors who, for various reasons, could use those obligations to their advantage.
Zason said there are three reasons why a company might be interested in buying their bad loans: To get a claim on the assets which the company put up to secure the loan; to obtain shares in the company; or to use it as a speculative investment opportunity, as many of the debtors are state or municipal bodies which may be more likely to pay back the loan eventually with interest.
As far as debt-for-equity swaps are concerned, Zason said that this can often be a good way for investors to assist in privatizing state enterprises. According to the law, any creditor who owns over 30% of a state enterprise's bad debt may demand that the Council of Ministers commercialize the enterprise and transfer shares in the company in exchange for debt forgiveness.
Richard Golden, managing director of Creditanstalt Financial Advisers SA, agreed that buying non-performing loans from banks offers many possibilities, but that the market is still young. "There is some interest in buying loans, but it's usually from Polish investors who know the debtor," Golden said. "There's not enough liquidity in the market yet, but there will be as more banks decide to sell off their loans."
The bank has also chosen to sell through negotiations with potential purchasers rather than through straight auction to the highest bidder, which gives them more flexibility in setting the price and payment terms.
"There's no sense in trading one debt for another one," said Cezary Kostrzewa, vice-director of collections. "This method gives the process more elasticity. And lately it seems that most banks are moving to this form of negotiations where you can work out details in discussions."
For the bank, the main reason for selling off its bad loans is to get a certain percentage of its money back. "This is the principal goal," said Collection Department Director Tomasz Zason. "Either you can get it back from the debtor who, frightened by seeing his name in the paper, agrees to some way of paying it off, or by selling it to somebody else."
Cleaning up its loan portfolio will also help the bank improve its profitability. According to Gazeta Bankowa's rating of Polish banks, 29.4% of PBK's loan portfolio is taken up by "irregular" loans, with 17.9% classified as lost. Their return on assets was 3.2%.
"As the name suggests, assets (aktywy in Polish) should be active," Zason said, playing on the root of the Polish word. "They should bring in profits. What we're selling are non-profitable assets."
But as the saying goes, one man's trash is another man's treasure, and the bank is counting on a lot of interest from investors who, for various reasons, could use those obligations to their advantage.
Zason said there are three reasons why a company might be interested in buying their bad loans: To get a claim on the assets which the company put up to secure the loan; to obtain shares in the company; or to use it as a speculative investment opportunity, as many of the debtors are state or municipal bodies which may be more likely to pay back the loan eventually with interest.
As far as debt-for-equity swaps are concerned, Zason said that this can often be a good way for investors to assist in privatizing state enterprises. According to the law, any creditor who owns over 30% of a state enterprise's bad debt may demand that the Council of Ministers commercialize the enterprise and transfer shares in the company in exchange for debt forgiveness.
Richard Golden, managing director of Creditanstalt Financial Advisers SA, agreed that buying non-performing loans from banks offers many possibilities, but that the market is still young. "There is some interest in buying loans, but it's usually from Polish investors who know the debtor," Golden said. "There's not enough liquidity in the market yet, but there will be as more banks decide to sell off their loans."
