Volksbank Romania, the local subsidiary of Austrian bank Volksbank, sold EUR 495 million worth of non-performing loans to a consortium of financial investors, the banks announced on Monday, July 28, 2014.

The buyers of the portfolio are Germany’s Deustche Bank and investment funds AnaCap Financial Parners, H.I.G. Capital International Advisers and APS Holding. The value of the transaction was not disclosed.

After this transaction, Volksbank Romania managed to reduce its non-performing loans ratio to 8 percent of its total portfolio, which is three times below the average of the Romanian banking system, which is 23 percent. The bank's non-performing loans totaled about EUR 600 million at the end of 2013, while its NPL ratio was 22 percent.

The transaction comes as Romania's central bank is encouraging local banks to clean up their balance sheets by selling non-performing loans, in order to reduce the NPL ratio of the local banking system.

The portfolio sold by Volksbank consists of a total of 3,566 guaranteed loans, with payment delays of more than 90 days, of which 84 percent are retail mortgage loans and 16 percent are corporate loans, according go the bank.

“The reducing of the non-performing loans portfolio is a key moment in our strategy to reposition on the market. We are also continuing to focus on increasing profitability,” said Beoit Catel, president of Volksbank Romania.

According to the bank’s representatives, the transactions doesn’t affect the net profit for 2014 or the bank’s solvency ratio, which currently stands at over 20 percent.

The transaction comes as Volksbank Romania’s parent group Volksbanken AG needs to sell its 51 percent stake in its Romanian banking business - which it has entirely written down - by the end of 2015, as one condition of the state support it received at the height of the financial crisis. Volksbank wants to make the business profitable before selling it.

Volksbank Romania posted EUR 104 million losses in 2014, some 40 percent lower than in 2012, as revenues declined by 8 percent, to EUR 130 million. The bank’s assets at the end of 2013 totaled EUR 3.09 billion.

Andrei Chirileasa, andrei@romania-insider.com