What does it mean when a bank sells non-performing loans?
Means that they gave a loan, but the person isn't paying. The bank doesn't want to collect (as collection of money is usually costly) and just sells the loan to another company that specializes in collecting debt. So the bank loans out $1000 to Joe. Joe doesn't pay. It would cost the bank $200 to have a collector call Joe up constantly and he still probably won't pay. The bank decides to get back some of its money by selling the loan to Company X for less than $1000. Joe now owes the money to Company X who can try to collect money from Joe.
I believe (and I could be wrong) that it means the bank is selling loans which have a very small chance of being paid back to the bank. Typically a company will buy those loans for a very small amount and aggressively pursue the payments. They paid very little, so any money collected above the amount paid is profit for the company, and the bank writes the loans off, which they would have to do in any case if the loan wasn't repaid.
Example: Loan of $1000, company buys loan from bank for $100, then collects $500 on the loan. The company made $400 on the loan by buying it and collecting ($100 paid, $500 collected, 500-100=400). The bank writes off $900 ($1000 loan - $100 company paid for it)
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