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NPL Servicing Market Outlook – 2027
Rise in focus of banks to reduce non-performing loans (NPL) exposure has led to increased demand for credit management services in recent years. NPL services are mainly used for collection of large unsecured corporate credit, which is characterized by a high level of specialization. The major purpose of NPL services is to ease the strain of unsecured loans on financial systems and ensure their professional management, which follows compliance with market principles used for maximizing recovery rates on such assets.
NPL management is considered a non-core activity for banks & corporate and requires a lot of resources, in terms of employees and capital. As a result, servicers play a key role to reduce this burden. Moreover, NPL disposals and outsourcing of management along with collection activities allow banks to manage their portfolio efficiently, thus achieving higher performances.
The global NPL servicing market is segmented on the basis of loan type, service type, enterprise size, end user, and region. Based on loan type, the market is divided into commercial real estate-backed loans, hospitality-related loans, residential mortgages, consumer unsecured loans, and others. In terms of service type, the NPL servicing market is categorized into due diligence & set-up, on boarding, asset & loan management, and others.
On the basis of enterprise size, the market is divided into large enterprises and small & medium enterprises (SMEs). In terms of end user, the market is fragmented into banks, credit unions, and others. Geographically, the market is analyzed across several regions such as North America, Europe, Asia-Pacific, and Latin America, Middle East & Africa (LAMEA).
Key players operating in the global NPL servicing industry include Credito Fondiario S.p.A, IFIS NPL Servicing S.p.A., Banca IFIS S.p.A., The Santander Consumer Bank, FBS, DoBank Italfondiario S.p.A., BCC Gestione Crediti S.p.A., Prelios S.p.A., and Duffandphelps LLC. These companies have adopted several strategies such as product launches, partnerships, collaborations, mergers & acquisitions, and joint ventures to strengthen their foothold in the global NPL servicing market.
Rise in need for improving debt collection efficiency, working with regulatory compliance and increase in demand for NPL servicing among investors are the major factors that drive the global NPL servicing market. In addition, increase in NPL ratios and high amount of bad debts also propel the market However, higher costs associated with NPL services is expected to hinder the NPL servicing market growth. Furthermore, rise in demand for these tools in developing economies and emergence of several new technologies in NPL servicing is expected to create lucrative opportunities for the market growth.
According to several studies, recovery of economic activities in the financing industry and implementation of regulatory policies to tackle bad debts have declined the euro area NPL ratio to 6% at the end of 2017. In addition, growth in adoption of advanced technologies among NPL servicers, along with growing trend of outsourcing of NPLs management activities among banks are the trends adopted by banks in recent years.
Globally, banks have been facing several challenges in delay of loan payments since several decades. For instance, HDFC made provisions of more than USD 20 crore for coronavirus pandemic in initial months of 2020. In addition, ICICI Bank reported almost 30% of its book under moratorium of three months of 2020, leading to USD 2600 crore out of its USD 8700 crore book. Such increase in moratorium on loan repayments provide banks with higher profits and make their business profitable.
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COVID-19 Scenario Analysis
Questions Answered in the NPL Servicing Market Research Report
Key Market Segments
Key Market Players