DDM is active in the distressed assets industry, with a focus on both non-performing loans (NPL) and performing loans. The business consists primarily of the acquisition of loan portfolios from financial institutions and collection of the debt outstanding.
In 2013, Ernst & Young evaluated the total European market size of NPLs to amount to EUR 1.0-1.5 trillion. Over the past years, the industry has continuously expanded, mainly driven by the economic downturn in Southern European countries.
In general, the companies active in this market can be divided into two strategic groups by the business models prevalent, namely: debt collection through in-house or external collection agencies. DDM has outsourced the debt collection to local top-tier agencies that are best suited to manage local market conditions.
Key drivers and trends
The distressed asset industry is influenced by the general state of the economy in Europe, and regulatory changes of bank capital requirements. In particular the main trends observed are:
- IFRS 9 new accounting standard
- Asset quality reviews and equity need for NPL’s
- Markets in Financial Instruments Directive (MiFID) framework
- Introduction of Basel III accord and future Basel IV standards developments