Italian NPL collections: May-July volumes stable but recovery strategies have changed
Servicers have increased their reliance on extra-judicial routes since the Covid-19 outbreak to compensate for lower judicial proceeds, at the expense of profits. They did this to adjust to the changed macroeconomic environment. The pandemic caused material backlogs in court proceedings and impacted borrowers’ affordability.
From May to July 2020, almost 70% of collections stemmed from judicial recoveries, mainly disbursement of cash in court, as most court proceedings were suspended. In 2021 and 2022, extra-judicial proceeds have increased by a third to 40%.
In the medium to long term, we expect extra-judicial strategies will continue to gain share as increased uncertainty and higher risk premiums will incentivise servicers to accelerate collections.
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