MILAN (Reuters) - Intesa Sanpaolo (BIT:ISP) has booked an impairment on its joint venture with Sweden's Intrum, Europe's biggest debt collector, in a move that highlights the challenges facing the bad loan recovery industry.
In its full year report, Intesa (LON:0HBC) said it had reduced by 66 million euros ($71 million) the book value of its stake in the joint venture it struck with Intrum back in 2018.
At the time, Intesa merged is loan collection business with the one Intrum owned in Italy in a deal that allowed the bank to shed a nominal 10.8 billion euros in bad debts.
The resulting venture, dubbed Intrum Italy, was 51% owned by Intrum and 49% by Intesa.
The impairment decision reflects the lower than expected amounts of bank loans turning sour that the debt collection industry is reckoning with, as well as higher interest rates which reduce the current value of future cash flows, a person close to the matter said.
In terms of collections, Intrum Italy has been performing better than expected, the person added.
Caught between higher debt costs and a bad loan drought, debt collectors are revamping their business models or seeking tie-ups.
Italy's doValue, backed by Softbank Group, last week announced it was merging with rival Gardant, owned by Elliott. The U.S. fund will finance the cash part of the deal and also back a portion of a future new share issue at the combined entity, together with doValue's top two shareholders.
Intrum in January sold a significant slice of its proprietary bad loan portfolio to raise cash and has appointed advisers to study options to refinance its 60 billion Swedish crowns ($5.65 billion) debt.
($1 = 0.9242 euros)
($1 = 10.6244 Swedish crowns)
(This story has been corrected to clarify that Gardant is owned by Elliott and doValue is backed by Softbank Group in paragraph 8)