News / From the associates

In Europe, the NPE market is experiencing a new phase of dynamism: in the second quarter of 2025, the total value of non-performing exposures at major European banks reached €373 billion, with an average NPE ratio of 1.84%. The situation varies across countries: while Germany and France are still seeing increases, Italy and Spain continue to improve asset quality. In Italy, the market remains among the most mature and stable in Europe, with default rates at historic lows and a banking NPE ratio of 2.3% (down sharply from 16.8% in 2015). Non-performing loans are concentrated in the construction (3.3%), retail (2.5%), and hospitality (2.3%) sectors. Transaction volumes have stabilized at around 20 billion per year, with an increasingly sophisticated market based on partnerships and more granular portfolios. The Italian system has seen a drastic reduction in the total stock of NPEs, falling from 397 billion in 2015 to 290 billion in 2024, with only 51 billion remaining on bank balance sheets. Lombardy and Lazio hold the highest shares of non-performing loans (19.7% and 14.1% of the total), while Trentino-Alto Adige and Friuli Venezia Giulia have the lowest levels. The corporate and SME sector accounts for 67% of non-performing loans, followed by consumer loans (24.7%). The market’s focus is gradually shifting toward new asset classes such as Stage 2 portfolios—loans showing mild deterioration but not yet classified as non-performing; performing loans, which return to performing status after previous periods of difficulty; and emerging segments such as Buy Now Pay Later (BNPL), tax receivables, and loans originated by the public sector or utilities, which are playing an increasingly significant role in alternative investment strategies. Interest in real estate securitizations is growing, reaching a value of €3.8 billion, driven by a decline in bank lending to real estate and increased focus on the energy retrofitting of buildings. The servicing sector is undergoing a profound transformation: no longer centered on volume but on efficiency, technology, and artificial intelligence. Following the major transactions of 2024, the market has stabilized, though with declining margins and shrinking revenues. The future challenge will be to combine sustainability, innovation, and governance capable of adapting rapidly to change. In this context, Italy—bolstered by mature management, an active secondary market, and new opportunities in areas such as state-guaranteed loans and reperforming loans—remains a leading laboratory of structural evolution for the entire European non-performing loan ecosystem.

Read the report: https://www.pwc.com/it/it/publications/npl/doc/PwC_NPE-ottobre25.pdf