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Deleveraging Europe Market Update H1 2015

European loan sales soar to new heights

August 2015

Deloitte Portfolio Lead Advisory Services shares thoughts on the future of the European loan sale market.

Key highlights in this edition

  • Current indications are that market activity in 2015 will be even greater than in previous years, with sales expected to reach over €150bn.
  • There are still loan portfolios being brought to market in Ireland and the UK. However, we see increased levels of activity across other markets including Italy, Germany and the CEE. The NPL stock in Italy continues to grow, and more banks are looking towards deleveraging and portfolio sales.
  • Debt investors have raised c. €100bn targeted for Europe, which with leverage means they potentially have >€300bn in cash ready to spend.
     

Headline numbers

  • We estimate that there is over €800bn of NPLs on the balance sheets of major European banks.
  • 190% increase in loan sales (GBV) in Italy from 2014 to 2015.
  • Sales of residential mortgages expected to increase by 40% in 2015 compared to 2014.
  • Loan sales in CEE expected to quadruple in 2015 compared to 2014.
     

“2015 will be another hectic year in the European loan sale market. We expect transactions to significantly exceed 2014, with c. €150bn of completed, ongoing and rumoured transactions at the end of H1. The combination of pent up demand and economic recovery means sellers are all of a sudden in a great position.”

 

David Edmonds, Global Head of Portfolio Lead Advisory Services at Deloitte

Themes influencing NPL transactions

  • More financial institutions across Europe have implemented non-core strategies and are following through with divestments.
  • Regulatory and market pressure to improve capital positions and reduce risk weighted assets, along with last year’s AQR programme, has contributed towards this trend of increased divestments.
  • The demand for non-core assets and non-performing loans has soared with distressed debt investors and private equity funds having raised over €100bn in the past 18 months.
     
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