European loan sales predicted to reach nearly €130 billion by the end of this year, beating 2016’s total

• At the mid-year point, €42 billion of deals have been completed in Europe, with another €86.5 billion of ongoing deals;
• Investors reportedly have over US $300 billion in funds available for distressed debt acquisitions in Europe;
• New markets open up in China, India and Brazil as activity moves on.

Sales of European non-performing loans (NPLs) and non-core assets (NCAs) are expected to reach €128.5 billion by the end of 2017, and overtake 2016’s record of €103.3 billion.

Analysis from Deloitte, recorded €42 billion worth of completed deals in the first half of 2017, with another €86.5 billion of ongoing deals expected to complete this year. This includes €9.3 billion of completed deals in Italy, with €43.5 billion worth of ongoing deals.

Andrew Orr, UK head of portfolio lead advisory services at Deloitte, comments: “The market is looking at another strong year, but Europe’s non-performing loan backlog is at an interesting junction. On the one hand the heavy regulatory focus on NPL sales has continued to drive up the pace of deals, yet there is still a way to go in terms of developing the market for this type of debt. Selling these assets allows banks to resume normalised lending levels, which would benefit the continent’s economies.

“All year the European Central Bank has been sending very clear signals that it’s time to deal with the ‘hangover’ of NPLs left over from the last financial crisis and start focusing on future lending.”

In a new development, Deloitte estimates that the private equity markets have now raised over US $300 billion in capital for acquisitions of loan portfolios across Europe. With some big US investment banks also expanding their lending programmes into Europe’s NPL market, the pool of funds looking to buy assets is potentially double where it was twelve months ago.

Andrew Orr concludes: “It looks as though the private sector is getting over its reluctance to finance the purchase of NPLs in previously untested markets. This comes after special government schemes were deployed in countries like Italy. Lending against NPL portfolios can offer attractive returns in what continues to be a low yield environment.

“While European loan sale activity will continue at its own pace, investors are now looking further afield to countries like Brazil. Here three years of recession have generated NPL volumes that cannot be absorbed by the banking sector alone. Also in both China and India investors are now applying for licenses in preparation for future loan trades.”

End

Notes to editors
These findings are taken from the latest Deleveraging Europe report, available from Deloitte. The report provides an up-to-date overview of loan portfolio transactions across key markets in Europe (including the UK).

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Deloitte LLP is a subsidiary of Deloitte NWE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.

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

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