Insights: Deleveraging Europe - 2015 NPL outlook

Our Deleveraging Europe report provides an overview of the non-core and NPL markets across Europe and our expectations of transaction activity in 2015 and beyond. The report also includes the results of the Deloitte 2014 European Bank Deleveraging Survey. We gathered responses from 30 banks across Europe to gauge their views on deleveraging; including main drivers, chosen strategies and key challenges.

The European deleveraging agenda 2015

Deleveraging continues to be a crucial element in banks’ strategies. With the establishment of the Single Supervisory Mechanism there is now a new regulatory regime advocating transparent and consistent reporting and forcing banks to re-examine their balance sheets. Deleveraging, de-risking and capital optimisation is therefore among the main challenges facing many banks across Europe today and will continue to face in the future.

Loan portfolio sales is increasingly recognised as an effective method of deleveraging, providing banks with a rapid source of capital raising and also relieves them of capital heavy assets. 2014 has been the most active year for loan portfolio sales since the onset of the financial crisis and we believe this momentum will continue as we move into 2015.

Key findings

Our research shows that there is approximately €760 billion of non-performing loans (NPLs) sitting on the balance sheets of major European banks.
Sale of non-core assets and NPLs will gradually move towards continental Europe: activity in Spain will accelerate, the number of transactions in Italy will start increasing and Greece will be gearing up for deleveraging.
Demand for distressed debt is growing. Investors have raised around €65 billion earmarked for European acquisitions, and with leverage they have nearly €350 billion of cash to spend.

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