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Led by Italy, European loan sales reaches €112 billion in first half of the year

11 August 2016

New estimates from Deloitte show that sales of European non-performing loans (NPLs) and non-core assets (NCAs) stand at €112 billion of completed and ongoing deals at the first half of 2016, already exceeding the figure of €104.3 billion for all of 2015.

Activity was driven by increased loan sale transactions in continental Europe, particularly in Italy and Central Eastern Europe. Between them they racked up €14.4 billion in completed deals, with a further €47.2 billion still ongoing in the first half of the year. Loan sales in Italy reached €11.4 billion in completed deals in H1 2016, with another €40.6 billion ongoing, a total of €52 billion.

According to Deloitte analysis, European financial institutions will continue to deleverage further as they tackle c. €2 trillion of non-core and non-performing assets. Meanwhile debt investors have around €110 billion in cash reserves targeted for Europe, which with leverage means they potentially have a fire power of over €350 billion.

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

“Having lived through uncertainty surrounding the EU Referendum vote, NPL activity across Europe is where we would expect. We anticipate most of the sales to conclude and the pipeline of deals to reopen in the second half of 2016. Non-performing loans remain a significant drag on a bank’s overall performance, both financially and operationally and most European institutions are focused on exiting their NPL stocks on an accelerated basis.

“While sales of non-performing loans in Italy are strong and lead the market in terms of volume, Bank NPL and impaired stock levels are still enormous at around €360 billion. However, the Italian Government has increased its involvement in the NPL market and taken important steps to ensure that it remains open to portfolio investors.”

In 2015, the UK had the largest value of non-performing sales in Europe of £39.9 billion, but in the first half of 2016 only reached £0.9 billion of sales.

David Edmonds concluded: “Domestic activity in the loan portfolio and M&A markets has been subdued as both investors and sellers held back for the referendum decision. Although UK loan sale activity will not reach the levels of 2014 and 2015, we expect activity to rise in the second half of the year. We believe UKAR will be a key seller in the coming year here, and the market will be livelier across Europe for the rest of the year.”

End

Notes to editors

These findings are taken from the “Deleveraging Europe H1 2016” report, which is also available from Deloitte. ‘Completed deals’ are loan sales completed by June 30th 2016. ‘Ongoing deals’ include some announced in July 2016, including Banca Monte dei Paschi di Siena’s (MPS) announced sale of €27 billion of distressed debt to a securitisation vehicle, as well as RBS’s sale of Greek shipping loans.

A non-performing (NPL) is the sum of borrowed money upon which the debtor has not made scheduled payments for at least 90 days

UK Asset Resolution Limited (UKAR) was established on 1 October 2010 to facilitate the orderly management of the closed mortgage books of both Bradford & Bingley and NRAM.

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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