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2016 set to be a record-breaking year for loan sales, topping €130 billion

4 February 2016

Sales of European non-performing loans (NPLs) and non-core assets (NCAs) are expected to push through €130 billion in 2016, a 25% increase on the €104.3 billion total for 2015, according to analysis from Deloitte. The figure of €104.3 billion for 2015 was itself a 26% increase on 2014’s €83 billion. The rises are driven by increased loan sale activity in continental Europe, particularly in Italy, Spain and other Central and Southern European countries. Between them they racked up almost €30 billion in completed deals, with a further €30 billion still ongoing at the end of 2015.

In 2016 European financial institutions will deleverage further as they tackle over €2 trillion of non-core and non-performing assets. Meanwhile debt investors have reportedly raised around €100 billion in the past 18 months targeted for Europe, which with leverage, means they potentially have over €300 billion in cash ready to spend.

David Edmonds, global head of portfolio lead advisory services at Deloitte, commented:

“Non-performing loans are a significant drag on a bank’s overall performance, both financially and operationally. Selling these types of assets becomes a good option to improve capital positions, with banks under increased pressure from regulators and shareholders to clean up their balance sheets.

“There are two trends to watch out for in 2016; increased activity in continental Europe, and a change in the asset class being traded. Regulatory changes and market pressure to improve returns are now driving a disposal of performing products. Sophisticated banks are really paring back to core, profitable business lines and either exiting or offloading risk in areas that don’t deliver on their strategic objectives.”

Deloitte estimates loan sales reached €45.8 billion in 2015 in the UK, and €17.4 billion for Italy (an increase of 36.7%). Meanwhile Spain completed €8 billion of loan sales at the end of 2015, with another €12 billion continuing into 2016.

David Edmonds concluded: “The UK is still by far the largest market, with many banks seeking to adjust their balance sheets, as well committing to an active deleveraging programme. However, there is significant activity in Italy as local banks start the deleveraging journey their UK counterparts started almost six years ago. Moves last week by the Italian Government and the European Commission to support NPL sales through the State Guarantee programme will only accelerate market activity.

“Looking ahead, we expect sales will continue to increase with such a significant amount raised by distressed debt and private equity funds looking for a home across Europe.”

End

Note to editors

These findings are taken from the “Deleveraging Europe 2015-2016” report, which is also available from Deloitte.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

Will Black
Deloitte LLP
+44 (0) 20 7007 8242
+44 (0) 78 2511 3222
wiblack@deloitte.co.uk

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