Neues

2022 Release of Performing Loan Valuation Models

By Burkhard Heppe

Chief Technology Officer

Published Wednesday 23 February, 2022

NPL Markets Ltd. is pleased to announce the release of an extended suite of valuation models for illiquid performing bank loans.

The models cover large corporate loans globally and retail loans in more than 25 jurisdictions (most of Europe, the UK and US). Asset classes include large corporate, SME, residential mortgages, commercial mortgages, unsecured consumer loans, credit cards, auto loans and equipment leases.

The models fall into two valuation categories, hold valuations and market valuations. Hold valuations assume that the lender holds the loan to term and makes appropriate loan loss provisions under IFRS 9. The models project the risk of rating migrations, default and loss under different forward-looking macroeconomic scenarios and discount future cash flows at the effective interest rate. Forward looking scenarios include the recently released macroeconomic scenarios for CCAR 2022 in the US, the semiannual World Economic Outlook from the IMF, the EBA bank stress test scenarios from 2021, or the climate stress test scenarios from the Bank of England (2021) and the European Central Bank (2022).

Market valuations estimate the fair value that a willing buyer and a willing seller would agree in an arm’s length sale of the loan. Market valuations require market inputs for the appropriate discount rate in a top down or bottom up discounted cash flow analysis. Market inputs are obtained from primary loan origination markets and secondary loan trading markets. Other key model parameters include the level and type of collateral, the existence of guarantees including the recently issued Covid loans with partial guarantees from sovereign entities, embedded options like interest floors and caps, or prepayment penalties.

Contact us to find out more about our geographic coverage and different loan types we value and trade.

Visit nplmarkets.com/en/research for more information on performing and non-performing loan valuations, valuation methodologies and calibration data, the valuation of securitisation tranches, stress testing, loan loss provisions and bank balance sheet optimisation.