Using data to reduce NPLs and identify profitable deals earlier

Reducing non-performing loans (NPLs) isn’t only about identifying struggling borrowers. NPLs are often the result of banks reacting too late when problems have already compounded and there are few options left on the table.  

In commercial real estate (CRE) lending, risk often creeps in when a KPI quietly slips below target, a key tenant moves out, a break clause looms, or a debt service starts to dip. Inevitably, these signals will be buried in rent rolls, occupancy rates, and covenant trackers, and scattered across departments. If no one sees the problem in time, a routine deal can quickly become a write-off with a significant impact on the bank’s bottom line. 

The European CRE market faces over €300 billion in refinancing by the end of 2026 as low-interest legacy loans collide with tighter covenants and rising repayments. At the same time, average cost-to-loan ratios have jumped from 55% pre-2022 to 64% by the end of 2024, reducing the buffer banks have to absorb shocks. 

With each missed breach, banks face increased NPL ratios, deeper regulatory scrutiny, and potential losses in the hundreds of millions. In extreme cases, continuous failure to identify red flags and manage risk can even put a bank’s license to lend at risk. 

This article explores the three key reasons NPLs escalate, plus how a platform approach to credit risk can help teams reduce NPLs as well as identify otherwise hidden opportunities. We’ll cover the consequences for banks with spreadsheet-based tracking, how risk, lending, and portfolio teams can tap into real-time data to uncover profitable deals and mitigate losses and how SAP Fioneer’s Credit Workplace enables early detection and smarter restructuring.

Explore SAP Fioneer’s Credit Workspace to see how banks are reducing NPLs today. 

The consequences for banks with spreadsheet-based tracking 

In CRE lending, credit risk management should start long before a borrower defaults. Yet in many banks, risk is still being treated as a reactive function and the systems in place are part of the problem. 

Even today, a typical CRE loan can still take months rather than weeks just to reach a decision – mainly due to the complexity of the process. 

Origination, servicing, covenant tracking, and risk management often live in separate systems or spreadsheets where there is no unified view of a loan across its lifecycle, plus no audit trails of how a covenant breach was handled. The time that risk analysts spend copying and pasting data between platforms is also an invisible operational cost and one that leaves banks unable to respond to deterioration until it’s too late. 

The cost of this late action is staggering. To put this in context, a single €50 million loan default requires the interest income from €2 billion in new lending or 40x new €50m loans at a 2.5% margin just to offset the capital loss. 

The inability to spot borrower distress early enough can lead to failure across three critical areas: regulatory compliance, profitability, and capital efficiency.  

1. Siloed systems increases regulatory risk
When key risk functions are split across siloed systems and spreadsheets, banks may struggle to demonstrate that they’ve acted early or appropriately. Without integrated risk monitoring, real-time visibility into deteriorating performance or auditable trail of intervention, teams may struggle to provide assurance that they are meeting fair treatment obligations.  
Together, this puts banks at intensifying regulatory scrutiny, additional capital buffer requirements, potential fines and in extreme cases, loss of their license to lend. 

2. Missed signals means rising NPLs and lower profitability 
NPLs are one of the biggest drags on bank profitability, with even a single mid-sized corporate default needing enormous new lending volumes just to recover the capital loss.
Yet, most banks still track key risk indicators like DSCR, rent rolls, and occupancy rates in asynchronous tools like Excel – often on shared drives, manually updated by relationship managers.
Analysts in multiple teams may track metrics in multiple different ways, and just one broken formula or miskeyed cell could significantly distort exposure metrics. What’s more, it’s all too easy to miss key information or early warnings like a tenant moving out then have to act after the breach, driving NPLs up even further. 

3. Poor visibility erodes capital efficiency
Credit risk monitoring isn’t just about avoiding losses. When a bank’s risk oversight is weak, regulators may require them to hold higher capital reserves to absorb potential losses – tying up funds that could be generating returns elsewhere.

Rather than force banks to put excess capital in reserve and drag down performance even if defaults never materialize, banks with strong credit systems and higher certainty can boost return on risk-weighted assets (RoRWA). 

How risk, lending, and portfolio teams can tap into real-time data to uncover profitable deals and mitigate losses 

If early warning signs are falling through the cracks, it’s no surprise if profitable lending opportunities are too. In a siloed system, originators are unable to see the full picture of portfolio exposure; risk teams lack insight into borrower behavior beyond the deal; and portfolio managers are stuck reviewing stale data once it’s already too late to act. Inevitably, promising deals will be delayed or declined not because they’re too risky, but because teams lack the information to fully assess them. 

To reduce NPL ratios and scale CRE lending sustainably, banks need a connected view of every deal. That means unifying front and back-office teams (originators, risk analysts, credit approvers, and portfolio managers) around the same, structured data in real time.  

Here are four principles for operational alignment that unlock both risk mitigation and revenue growth: 

1. Make structured data the foundation 
CRE lending generates a huge volume of paperwork: title deeds, valuation reports, insurance certificates, and environmental audits. 
Traditionally, these documents will be manually reviewed, summarized, and rekeyed into local systems: an approach that slows underwriting with approval bottlenecks and disconnects monitoring data from origination insight. 
Leading banks are moving to a data-first approach that uses AI to pull key facts and figures from documents, organize them into structured, machine-readable fields, and automatically populate risk and lending systems. 
Rather than have skilled analysts spend their time copying and pasting data, they can instead double down on high-value work like assessing creditworthiness or advising clients. 

2. Automate covenant and KPI monitoring across the loan lifecycle
Too often, monitoring is done at a local, end-user level.. Yet, as portfolios grow, so do the risk signals – especially when these projects might span multiple quarters or involve complex tenant arrangements.
Without automation, analysts rely on memory, spreadsheets, or calendar reminders to track covenant thresholds and tenant milestones, making it easy to miss critical triggers.
Instead, the banks that implement event-based lifecycle monitoring will receive automated notifications. For example, do we need a covenant review when occupancy drops below 90%? Or DSCR is nearing the soft covenant limit? Or a critical lease break clause is due.
Building these steps into the workflow means that banks can surface issues before they escalate. Likewise, teams can spot high-performing borrowers early and identify prime moments to upsell or restructure.  

3. Make cash flow forecasting visual, intuitive, and collaborative
In many banks, scenario planning is still performed in static spreadsheets or buried in code-heavy risk tools – formats that may be difficult to first understand or second communicate to other teams or clients. Its code-heavy nature also limits who can contribute to it.
With integrated, visual forecasting tools, analysts can run “What if” scenarios in real time, model the impact of market shifts, tenant exits, or interest rate hikes, then share results instantly with risk committees, credit approvers, or client teams. 
Ultimately, when forecasts are simple to create and easy to share, they become strategic tools across the workflow.

How SAP Fioneer’s Credit Workplace enables early detection and smarter restructuring  

In commercial real estate lending, distress is very rarely a single catastrophic event. Rather, it’s a slow decline and sequence of KPIs drifting below threshold, key tenants exiting, or lease break clauses approaching. When these critical risk signals come without warning and are hidden in spreadsheets or static documents, it’s easy to miss the window when a deal could have been saved or even when a more profitable deal arises. 

SAP Fioneer’s Credit Workplace gives banks the visibility and control to intervene before it’s too late – enabling real-time, asset-level monitoring, automated risk detection, and structured decision-making across the full lifecycle.  

Unlike generic credit systems that require costly customization, the platform is designed for the complexity of CRE – supporting smarter, faster responses across the front, middle and back office. 

Banks using Credit Workplace are able to: 

Spot risk before it escalates with real-time monitoring 

With the Credit Workplace, credit teams no longer need to wait for quarterly reviews or manually track performance metrics to identify emerging risks. The platform continuously monitors every CRE exposure, automatically flags early warning signs and triggers follow-up actions to give lenders more time and more confidence in their decision-making. 

Here’s how it works: 

• AI-powered document extraction: Rather than manually rekey data from tenancy schedules, valuation reports, or insurance documents, the system uses AI to extract and structure the data automatically.  

• Automated covenant and KPI tracking: Built-in rules monitor financial and non-financial metrics (like LTV, DSCR, occupancy levels, and lease break clauses). When a metric crosses a threshold, the system triggers an alert and assigns a follow-up task.  

• Visual cash flow forecasting and scenario analysis: The platform includes intuitive dashboards and bar charts so analysts can forecast cash flow impacts, stress test various outcomes, and instantly share results with credit teams or risk committees. Teams can quickly model market shocks or tenant exits, simulate payment plans or term extensions, and recommend solutions that reduce loss exposure. 

Together, these capabilities shift risk management from a retrospective task to a dynamic, always-on function – so that teams can have the upper hand. 

Unlock more restructuring options with earlier insights 

By surfacing issues earlier in the loan lifecycle, teams gain the time and clarity needed to structure borrower support plans that are both commercially smart and regulatory sound.  

That might mean offering an interest-only period, extending the loan term, adjusting repayment schedules in line with a tenant shift or market disruption, or initiating proactive client conversations about upcoming lease events. 

To support this, the Credit Workplace includes:  

• Asset-level visibility and lease-level drilldowns: Dashboards help teams quickly identify which tenants or leases are driving risk at the asset level, allowing for targeted interventions like adjusting cash flow models based on a key tenant exit or renegotiating terms.  

• Role-based workflows for credit and risk collaboration: When early warning signs are detected, the platform routes follow-ups to the right team – whether it’s a relationship manager, credit analyst, or risk lead – accelerating response times. 

Real-time data is the key to reducing NPLs without slowing down CRE lending 

Ultimately, NPLs often arise from missed opportunities to act and no system to track the subtle shifts like a drop in occupancy, a lease expiry, or a breached covenant that might otherwise go unnoticed in a spreadsheet. Once the moment to intervene has passed, options narrow fast. 

SAP Fioneer’s Credit Workplace gives banks the tools to stay ahead of risk with: 

• Automated alerts for covenant breaches and performance dips 
• Real-time monitoring across asset, lease, and portfolio levels 
• Structured workflows to support fast, auditable decisions 

With earlier insight, banks can restructure deals while they’re still viable, reducing defaults without slowing down lending. 

Ready to see how Credit Workplace could work in your organization? Request a personalized demo here.