News release

European underperforming loans reach record high

Whilst the average European NPL ratio fell to 1.8% at the end of Q2 2022, Stage 2 underperforming loans increased to almost 1 in 10 – the highest level recorded

January 18, 2023

Alexandra Ionita

+40 746 275 213

Bucharest, January 18th, 2023 – JLL has released its 2022 European Banking: Credit Portfolio Update report which reveals that whilst the average European NPL ratio fell to 1.8 percent at the end of Q2 2022, Stage 2 underperforming loans increased to 9.5% - up from 8.9% at the end of 2021 and the highest level recorded since IFRS 9 Financial Instruments became effective in January 2018.

Europe is experiencing multiple strong headwinds, and these are more acute in comparison to other regions. Commenting that there is already considerable divergence in both inflation and interest rates across the region, the report highlights that this is something many European economies are not used to seeing. Tightening debt costs are being felt universally and whilst the ECB was initially slow to react, it is now moving more quickly, with financial markets predicting further tightening.

A key challenge facing many real estate corporates, who historically have been reliant on the bond markets, is the quantum of near-term maturities – including the Nordics where JLL estimates circa 32% of real estate corporate bonds are due to mature within the next 2 years, and at a time when debt capital markets are closed, funding costs are rising and asset values falling which might force some of the real estate players to consider more expensive debt, recaps, asset sales or, perhaps more palatable, consider joint ventures with private capital investors.

Maxime Otto, Capital Markets at JLL Romania: “Despite current economic headwind and geopolitical context, Romania’s NPL ratio decreased, in Oct 2022, to 2.9 % reflecting the resilience of the Romanian economy. However, in the context of a high inflation and tightening of monetary policy connected with a forecasted slowdown of the GDP growth, it is likely that these factors will affect household’s spending power as well as companies’ profitability which could ultimately lead to a potential increase of NPLs in the coming months. That said and considering both the level capitalization of the Romanian banking system as well as quality of its loan portfolio, the forthcoming NPL ratio is expected to follow trend witnessed in OECD countries which should allow a normal lending activity across all segments.”

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries and a global workforce of more than 102,000 as of September 30, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit