Hand-out theme table “investing in Dutch consumer finance NPL portfolio's”

Amsterdam, 20 November 2015

Agenda

� Why invest in Dutch portfolio’s / NPL’s?� Dutch NPL market in European perspective� Market observations� Overview of market parties� Different types of transactions common in the Dutch market� Legal considerations� Collections environment� Key take aways

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Why invest in Dutch portfolios / NPL’s?

Source: http://www.cpb.nl/persbericht/3216073/cpb-publiceert-macro-economische-verkenning-2016Informal observations, market data, personal opinion

� Economic growth 2015 / 2016 +2% / +2.4%� Unemployment decreasing 2015 / 2016 6.9% / 6.7%� Deficit 2015 -2.1% and 2016 -1.4%� Low inflation. � Increasing consumer confidence.

� Collections friendly market. Strong legal creditor position. � Well developed DCA / bailiff market, sensitive to competition, eager.

� Seller side developing, market appetite for opportunities. Activity increasing, but relative to other countries still low.

� Sufficient benchmark and deal experience available at seller, legal, servicer and buyer side.

Marco

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In perspective

Taken from PwC presentation by Guillermo Barquin on the European NPL market, Madrid – Spain (15.10.2015)Source: PwC, Central Banks published data, World Bank and IMF.PwC market survey 9M 2015: expected volume Retail and CRE = 3bn.

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Some market observations…

Source: graph: http://www2.deloitte.com/content/dam/Deloitte/uk/Documents/corporate-finance/deloitte-uk-deleveraging-europe.pdf Quote PwC: http://www.pwc.co.uk/services/transaction-services/insights/market-survey-2015.html

� Observation: less deals by DCA’s and more by investors. � The large Dutch retail banks have not started selling NPL’s on a large schale

(yet?).� NPL stock has increased steadily over the years. � Dutch government doesn’t sell student loans, etc. � Most active sellers: telecos / consumer finance / energy & utility. Some other

sectors like housing are moving slowly, initiating some test transactions.� Relatively stable market, some 200-300MM of

(retail) NPL’s sold yearly by the financial sector. � Most publications and reports have a

variable outlook for the Dutch NPL market.

PwC: We are seeing increasing appetite for Dutch banks to deleverage their NPLs and large PE investors are increasingly turning theirattention to this market.

The market

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Dutch market players – (potential) investors in NPL’s

Source: personal observations, informal information

Secured and unsecured

Locals

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Common transaction types in the Dutch market

Source: personal opinions / industry estimates.

Type of deals

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Some legal considerations

Source: personal opinions, public information

� No (late/arrears) fees allowed under Dutch law (WCK – consumer finance law) Legislator assuming all cost paid out of regular interests and delay interests.

� (delay) Interest to be charged after termination and no higher then agreed interest in terminated contract.

� Laws governing the charging of late fees as stipulated in the WIK (law on collection fees) do not apply to consumer finance.

� Management (beheer) of receivables requires a licence from the regulator (AFM -Authority Financial Markets). Legal ownership of CK receivables can be obtained without a license, however no management (collect, receive payments, etc.) can be done.

� To obtain an AFM license a membership of the Dutch credit bureau (BKR) is required.

� The buyer or investor can rely on a servicer who has these licenses. � A movement is visible in the market of more servicers / buyers applying for a

license.

Legal

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Some legal considerations

� Limitation period after termination between 2 and 5 years, depending on type of consumer finance.

� Limitation period of a verdict is 20 years (fixed on the amount as stipulated in the verdict), any delay interests after the verdict have a limitation period of 5 years).

� Limitation periods can be extended by sending the consumer a letter (please take receiving theory risk into consideration) or summons by a bailiff (no or very limited risk). Extension for no longer then 5 years.

� Efficient court system, in majority of cases verdict will be obtained within 3 months. Estimated 70-80% of legal collection verdicts granted without debtor actively participating in proceedings (verstek vonnis).

� For court cases concerning consumer finance no lawyer representation is needed up to 40k.

� Most but not all legal collection cost will have to be paid by the debtor if convicted.

Legal

Source: personal opinions, public information

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The collections environment

Source: public sources, news articles, court studies.

� Debt collection agencies are governed by a limited number of specific collection laws. The larger DCA’s are a member of the Dutch association of collection companies (NVI) and adhere to their rules and regulations. There are between 550 and 600 DCA’s registered in the Netherlands, however the larger NVI members (#30) cover some 70% of the market.

� There have been bankruptcies / restructuring / FTE reductions within the sector. A further shakeout and / or consolidation is expected.

� Specialized (medium sized) DCA’s seem to be performing better then (large) all round DCA’s.

� Increased competition and pressor on prices / margin can be observed when tendering DCA but also bailiff services.

� In recent years the cost of legal collections (mainly court fees) have increased significantly. Also, the rules have changed regarding the possibilities for bailiffs pre-financing the out of pocket cost of legal collections and NCNP constructions. Reducing the number of legal collection cases (-30%). After the implementation of WIK in 2012 a trend is visible of companies using DCA’s less for amicable collections and moving those activities in-house, viewing collections as a profit centre.

Some basics – DCA’s

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The collections environment

Source: public information, trade organizations, research by ING, ABN AMRO, other public sources.

� Bailiffs are appointed by the Crown, but are also businesses that need to generate a profit. Out of pocket + commission based on success is allowed. The top 5 bailiff companies cover some 50% of the market volume.

� They are governed by specific sections of the law, their trade organization (KBvG) and the bureau of financial oversight (BFT). Fee’s charged to consumers are regulated by law (Btag).

� Bailiffs can represent the creditor in court, vast majority of legal collections cases are managed by Bailiffs. Usage of law firms for legal collections (BtC) is very limited.

� Bailiffs are allowed to offer amicable collection services, thereby competing with DCA’s. Estimated that some 40% of bailiff turnover is generated by amicable collection activities.

� Individual bailiffs (some 950) are a member of the Royal Professional Organization of Judicial Officers (KBvG).

� Fragmented bailiff market with a lot of small and medium sized companies. Number of companies in the Netherlands between 150-200, 400MM+ turnover. There have been bankruptcies / restructuring / FTE reductions within the sector. A further shakeout and / or consolidation is expected.

� Digitalization (government driven program KEI) in different stages of implementation.

Some basics - bailiffs

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Considerations when entering the market…

Translation of Klant Belang CentraalSource: personal opinions / informal information.

Key take-aways (when buying NPL’s):

� You can expect and ask for post deal service and aftercare.� Information, digital files and financial data well developed and available. � Relatively smaller deals, spot sales and forward flow are well established. � Interest of the regulator (AFM) in debt sales increasing, market adjusting. Not

comparable however to for example the UK. � Know the legal and compliance requirements. Imbed customer centricity* into

your processes and offer. � Straight forward NPL’s, specials usually already internally managed. � Creditor friendly environment. Sufficient options for amicable and legal

collections. Cost of legal collections has increased over time.� Competitive bailiff and DCA market, strong negotiation position.

Dear investor

Thank you for your attention and joining this discussion

Casper Sonnega

Director Collections Business Unit Benelux

Contact details:

Mobile: +31(0)6 – 10 90 72 23

E-mail: casper.sonnega@santander.nl

www.linkedin.com/in/caspersonnega