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European banks to sell a record US$154 billion of loans, PwC says

Tuesday, August 18, 2015 - 19:02

[LONDON] European banks are set to divest a record 139 billion euros (S$216 billion) of loans this year, led by the UK, as the industry accelerates asset sales to meet new rules, according to PricewaterhouseCoopers LLP.

Banks have offloaded 54.5 billion euros of debt and a further 84 billion euros of loans are in the process of being sold, PwC said in a report Tuesday. The UK and Ireland account for more than 60 per cent of deals in progress this year, after disposing of 125 billion euros in the five years through 2014.

"It is no surprise the UK and Ireland, followed by Spain, have been the most active portfolio transaction markets in Europe given that banks locally have been very active in cleaning up their balance sheets," said Richard Thompson, chairman of PwC's European portfolio advisory group.

"Italy has seen a large increase in activity in 2015 and is one of the main focus areas for international investors and funds."

Banks have been shrinking their balance sheets since the financial crisis to comply with a raft of regulations that require them to maintain capital buffers as a proportion of assets, to absorb losses and protect taxpayers from bailouts.

Hedge funds and private-equity firms are among buyers of the loans as they seek to gain exposure to the recovering British and European economies, which has boosted competition and prices this year, PwC said.

Commercial real estate debt and secured mortgages accounted for 83 per cent, or 45 billion euros, of loans sold by banks so far this year, the data show.

Bolster Capital Last month, Commerzbank AG and Royal Bank of Scotland Group Plc sold about US$1.4 billion of unwanted assets, including ships and real-estate loans, to bolster capital. In April, RBS also divested US$5.6 billion of North American corporate loans to Japan's Mizuho Financial Group Inc.

Goldman Sachs Group Inc, CarVal Investors LLC and Bank of Ireland Plc bought loans with a face value of 2.6 billion pounds from Lloyds Banking Group Plc in July.

UK banks are expected to sell another 42.5 billion euros this year, raising the total for 2015 to 56 billion euros, PwC estimated. Ireland may account for 18.5 billion euros of sales. Spanish lenders, with about 15 deals in progress, will dispose of about 20 billion euros in total, with German and Italian banks expected to sell 22 billion euros and 16 billion euros respectively.

BLOOMBERG