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Portugal recorded the sharpest annual reduction in the Non-performing Loans (NPLs) stock in Europe, according to Prime Yield’s latest report ‘Investing in NPL in Iberia’. Between the second quarter of 2024 and the same period in 2025, the country reduced its stock-pile of bad debt by 15.7%, reaching a total of €4.3 billion, the lowest figure in the last decade.

Currently, NPLs represent 2.1% of active loans in the Portuguese financial system, a ratio which, although still slightly above the European average (1.8%), confirms the strong deleveraging of the national sector. In 2015, non-performing loans accounted for 19.6% of the total and amounted to around €41.0 billion, i.e. almost ten times more than the current volume.

According to data from the European Banking Authority (EBA), Portugal now holds only 1% of Europe’s total NPLs, ranking among the countries with the lowest stock of this type of credit.

“The reduction in bad debt in Portugal and also in Spain reflects the dual circumstances of tighter restrictions on lending following the financial crisis and the strong momentum in the sale of NPL portfolios in recent years. We are currently dealing with two mature markets in terms of NPL sales, whose financial systems have deleveraged heavily in recent years, so naturally, transactions involving this type of investment asset tend to be at levels far removed from other years,” comments Francisco Virgolino, Managing Director of Prime Yield.

After a 2024 marked by an unprecedented transaction – the sale of the Cascais Project portfolio, worth €4.2 billion – the Portuguese NPL market is showing signs of normalisation this year. By September 2025, transactions totaled around €1.4 billion, already exceeding the turnover for 2024, which, excluding Projeto Cascais, amounted to €1.1 billion.

Prime Yield anticipates that the final figure for 2025 could be even higher, as several transactions are still ongoing.

Prime Yield’s study points to a new phase in the Iberian NPL market. Portugal and Spain are now at different stages of maturity – with the former stabilizing activity and the latter experiencing a more pronounced downturn.
‘Looking ahead, despite the decline in NPL sales activity in the Iberian Peninsula in 2025, both Spain and Portugal continue to stand out as relevant investment markets, leading to more selective strategies on the part of investors. However, strong interest in high-yield assets suggests that specialist investors remain active,’ concludes Francisco Virgolino.

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The report was echoed in the Portuguese press:
Read the article published in Vida Imobiliária here
Read the article published in Jornal Construir here
Read the article published in Diário Imobiliário here
Read the article published in Idealista here