ING Groep NV has begun sounding out investors about a potential sale of roughly €230 million in non-performing loans held by its Spanish unit, a move that underlines the bank’s push to tighten balance-sheet quality as higher interest rates reshape European credit markets.
The portfolio under discussion is understood to include unpaid secured and unsecured exposures tied largely to Spanish corporate and real-estate borrowers, according to people familiar with the matter. Talks are at an exploratory stage and no final structure or timetable has been confirmed, but the process reflects a broader clean-up effort across the sector as lenders reassess risk following years of easy money.
For ING, Spain represents a smaller market compared with its core franchises in the Netherlands, Belgium and Germany, yet the country has been strategically important for digital retail banking growth. The soured loans trace back mainly to legacy corporate lending and property-linked financing extended before the European Central Bank’s aggressive tightening cycle altered borrowing costs and refinancing dynamics.
Market participants say portfolios of this size are typically pitched to specialist credit funds, private equity firms and distressed-debt investors, many of whom have been building dry powder in anticipation of rising defaults across southern Europe. Spain’s non-performing loan ratios remain well below post-financial-crisis peaks, but higher rates and slower economic momentum have begun to expose stress in certain segments, particularly among smaller developers and leveraged mid-market firms.
The sale discussions come as European banks face renewed scrutiny over asset quality, even as headline profitability has improved. Higher net interest margins have lifted earnings, but regulators and investors are watching closely for signs that credit costs could climb as borrowers struggle with refinancing at materially higher rates than those locked in during the ultra-low-rate era.
Within Spain, banks have spent more than a decade reducing bad loans accumulated after the property crash. Large clean-up transactions dominated the years following the euro-zone debt crisis, while more recent deals have been smaller and more selective, often focused on niche portfolios rather than system-wide disposals. ING’s mooted transaction fits that pattern, signalling targeted risk management rather than a wholesale retreat.
People close to the process say the portfolio includes loans backed by commercial real estate as well as corporate exposures with collateral attached, which could help support pricing despite the challenging environment. Valuations for non-performing loans have been sensitive to assumptions about property prices, recovery timelines and the cost of servicing distressed assets, all of which have been affected by inflation and financing costs.
For investors, Spain continues to offer attractions compared with other southern European markets. Legal frameworks for enforcement and restructuring have evolved, and economic growth has outpaced several peers, supported by tourism, exports and investment linked to European recovery funding. At the same time, pockets of vulnerability persist, particularly among borrowers that relied on short-term or floating-rate funding.
ING has not publicly commented on the talks, and the bank has previously said it manages credit risk conservatively while remaining committed to its key European markets. Any sale would be consistent with efforts to optimise capital usage and keep non-performing exposures at manageable levels, rather than signalling a strategic pullback from Spain.
Across Europe, similar transactions are being prepared or executed by lenders seeking to get ahead of potential deterioration. Distressed-debt specialists report an increase in deal flow discussions, though many note that sellers and buyers are still bridging valuation gaps created by uncertainty over interest-rate paths and economic growth.
Analysts say banks with diversified income streams and strong capital buffers, such as ING, are better positioned to absorb losses from selective disposals if pricing falls short of book values. At the same time, completing sales can free up management attention and reduce the operational burden of working out problem loans internally.
The portfolio under discussion is understood to include unpaid secured and unsecured exposures tied largely to Spanish corporate and real-estate borrowers, according to people familiar with the matter. Talks are at an exploratory stage and no final structure or timetable has been confirmed, but the process reflects a broader clean-up effort across the sector as lenders reassess risk following years of easy money.
For ING, Spain represents a smaller market compared with its core franchises in the Netherlands, Belgium and Germany, yet the country has been strategically important for digital retail banking growth. The soured loans trace back mainly to legacy corporate lending and property-linked financing extended before the European Central Bank’s aggressive tightening cycle altered borrowing costs and refinancing dynamics.
Market participants say portfolios of this size are typically pitched to specialist credit funds, private equity firms and distressed-debt investors, many of whom have been building dry powder in anticipation of rising defaults across southern Europe. Spain’s non-performing loan ratios remain well below post-financial-crisis peaks, but higher rates and slower economic momentum have begun to expose stress in certain segments, particularly among smaller developers and leveraged mid-market firms.
The sale discussions come as European banks face renewed scrutiny over asset quality, even as headline profitability has improved. Higher net interest margins have lifted earnings, but regulators and investors are watching closely for signs that credit costs could climb as borrowers struggle with refinancing at materially higher rates than those locked in during the ultra-low-rate era.
Within Spain, banks have spent more than a decade reducing bad loans accumulated after the property crash. Large clean-up transactions dominated the years following the euro-zone debt crisis, while more recent deals have been smaller and more selective, often focused on niche portfolios rather than system-wide disposals. ING’s mooted transaction fits that pattern, signalling targeted risk management rather than a wholesale retreat.
People close to the process say the portfolio includes loans backed by commercial real estate as well as corporate exposures with collateral attached, which could help support pricing despite the challenging environment. Valuations for non-performing loans have been sensitive to assumptions about property prices, recovery timelines and the cost of servicing distressed assets, all of which have been affected by inflation and financing costs.
For investors, Spain continues to offer attractions compared with other southern European markets. Legal frameworks for enforcement and restructuring have evolved, and economic growth has outpaced several peers, supported by tourism, exports and investment linked to European recovery funding. At the same time, pockets of vulnerability persist, particularly among borrowers that relied on short-term or floating-rate funding.
ING has not publicly commented on the talks, and the bank has previously said it manages credit risk conservatively while remaining committed to its key European markets. Any sale would be consistent with efforts to optimise capital usage and keep non-performing exposures at manageable levels, rather than signalling a strategic pullback from Spain.
Across Europe, similar transactions are being prepared or executed by lenders seeking to get ahead of potential deterioration. Distressed-debt specialists report an increase in deal flow discussions, though many note that sellers and buyers are still bridging valuation gaps created by uncertainty over interest-rate paths and economic growth.
Analysts say banks with diversified income streams and strong capital buffers, such as ING, are better positioned to absorb losses from selective disposals if pricing falls short of book values. At the same time, completing sales can free up management attention and reduce the operational burden of working out problem loans internally.
Topics
Banking