Italian non-performing loans change size: smaller portfolios, specialised buyers, more single-name deals

In 2025 the Italian non-performing loan market traded €22 billion in gross book value, in line with expectations. On its own the figure says little. What has changed is the shape of the deals, documented in detail by the Banca Ifis Market Watch Npl published in May.

From jumbo deals to granular portfolios

The average gross value of portfolios sold fell from about €1 billion in 2017 to about €190 million in 2025, and the average ticket shrank with it. The three largest selling banks accounted for 68% of volume in 2017; in 2025, about 5%. The secondary market remains significant but fell to 47% of the total from 57% a year earlier.

Behind these numbers lies the end of a phase. Non-performing exposures on Italian bank balance sheets fell to €49 billion at the end of 2025, an NPE ratio of 2.6%, more than five times lower than in 2017. The GACS state guarantee scheme is gone. Banks sell less, sell earlier and sell better-quality positions.

The report also notes a rise in single-name transactions.

For real estate this is the key detail. A single property-backed position is not priced with a statistical recovery model applied to thousands of loans, but with due diligence on the asset, the state of the procedure and the debtor.

Who is leaving and who is coming in

At the end of June, Banca Ifis launched a competitive process to sell and deconsolidate its NPL business, for years one of the group's pillars. CEO Frederik Geertman indicated signing by year-end and completion in early 2027. The shares fell as much as 33% that day, partly on a profit warning. The stated rationale is regulatory: calendar provisioning makes purchased non-performing loans costly to hold, and the bank intends to replace capital commitment with a partnership model. In the first quarter, the segment's revenues had already dropped to €47.2 million.

According to Milano Finanza, large US distressed-credit funds including Apollo, Fortress and Cerberus have looked at the file. Non-performing credit is moving from regulated banks to non-bank capital, more patient on capital and more demanding on returns.

Rising prices, fewer court routes

NPL portfolio prices are generally rising, driven by competition over smaller volumes and fresher loans. For UTP portfolios pricing is highly heterogeneous. On the 44 securitisations monitored by Scope, 2025 collections beat earlier estimates, 3.8% of residual gross value against 3.1% expected, while the share of court actions came in lower, 71% against 74%.

The forecasts' blind spot

The Market Watch expects a moderate rise in the default rate over 2026-2027, from 1.04% at the end of 2025 to around 1.1-1.2%. Those estimates rest on Bank of Italy projections of 3 April, before the ECB hikes of June and September. The report itself attributes the sharp fall in construction defaults to NRRP investment, €37.4 billion in 2025, a support set to fade as the plan closes.

Neither factor points to a wave of new bad loans: Italian banks start from historically low levels. Together, though, they suggest that UTP flows linked to builders and developers on floating-rate financing could prove larger than current models indicate.

The German comparison

At German significant banks, the NPE ratio on commercial real estate rose from 2.2% in early 2023 to 6.9% at the end of 2025, and real estate now accounts for half of the country's corporate bad loans. In Italy the same indicator fell from 7.7% to 4.3%, largely thanks to early de-risking.

Summary

The Italian NPL market is moving from managing inherited stock to managing flows. Deals will be smaller, more frequent and more tied to individual assets. For property-backed exposures, value shifts from the ability to buy large portfolios at a discount to the ability to read a single collateral, the timing of the procedure and the options for repositioning the property. With the cost of money rising again, that reading will set the price.