EXCLUSIVE: Interview with Prelios' new head of credit servicing

Riccardo Serrini, newly appointed chief executive of Prelios Credit Servicing, talks to PropertyEU about the company's plans to partner with the struggling Italian banking sector and institutional players.

‘Banks are increasingly outsourcing the servicing of their non-performing loan portfolios to external parties as the size of these assets has become enormous,’ Serrini told PropertyEU.

The new CEO previously held the position of general manager and CIO at Prelios' fund management arm and before that worked for a number of companies including Morgan Stanley, ING REIM and Intesa Sanpaolo's real estate structured finance arm.

As part of its new strategy, Milan-based Prelios is about to acquire the remaining 20% stake it did not already own in its non-performing loan management unit, Prelios Credit Servicing, from French bank and business partier Crédit Agricole Corporate & Investment Banking.

The acquisition is in line with Prelios' strategy to focus on the provision of services to third parties and move away from balance-sheet investments.

PropertyEU: Your appointment as CEO of the credit servicing arm comes at a time of restructuring for the group. What will be the priorities in your new role?
Serrini: Today is an interesting time to be managing non-performing loan portfolios, given the strong growth experienced by these assets. Prelios Credit Servicing is one of the three business lines that are strategic for the group, alongside Property & Facility Management (now renamed Prelios Integra), and Fund Management (Prelios SGR). The credit servicing activities are synergetic to the other business units because the success of recovery activities in real estate-backed loans is dependant upon asset management.

For example, in the case of a loan securitised against a shopping centre with a high vacancy rate, asset management is needed to improve the occupancy ratio before being able to recover value from the sale.

Against this background, Prelios is well positioned to take advantage of its expertise in both the financial sector and the real estate industry. The purchase of the remaining 20% of the credit servicing arm reflected the company’s plan to take full control, and, most importantly, make the unit completely independent from any banking groups.

PropertyEU: How do you see the company developing in the near future?
Serrini: Up to recently, the business was captive of the investments made in the past in joint ventures with Morgan Stanley and Crédit Agricole; the activities were very much focused on the servicing of the portfolio owned by the parent group. This is changing rapidly. We have signed four new loan management contracts for third parties, largely banks, worth a total €1.2 bn in the past 12 months. We expect to sign new ones in the near future, permitting further growth for the unit, which currently manages €8.7 bn of non-performing loans, ranking it as the second credit servicing group in the country in terms of assets under management.

Business development is very important, particularly today when the volume of non-performing loans is growing at an annual rate of some 30%, according to data from ABI, the Italian banking association. The face value of NPLs has increased three-fold in Italy since 2008, reaching €135 bn last month, up €2.5 bn in one month alone.

This figure should raise concerns as it represents around 7% of the total, meaning that for every €10 provided by the banks, 70 eurocents are not paid back. The banking sector is having difficulties in absorbing these losses. Servicers should help banks in their efforts to reduce that value.

PropertyEU: - How will you go about realising the company’s growth strategy?
Serrini: Our strategic advantage is to 'be local', leveraging on an extensive network, and at the same time offering the full range of services with a unique platform in the Italian market. We can take advantage of our expertise in both the banking and the real estate sectors.

The company was created back in the 1987 from the merger of the real estate activities of a number of banks including Monte dei Paschi di Siena, San Paolo, ABI, etc. Called SIB (Servizi Immobiliare Banche), the unit was established to manage the banks’ portfolio of non-performing loans at a time of crisis for the property sector.

We have been working with sophisticated institutional investors such as Morgan Stanley for years and we speak the same language. We can function as a link between the local industry and international investment community. The sector is becoming more and more regulated, and in the future we expect institutions to be interested in investing in non-performing loan portfolios in Italy, along the lines of what is already happening in other European markets.