Loan sales expected to increase by 60% for 2015

Sales of non-performing loans (NPLs) and non-core assets (NCAs) are expected to top €150bn in Europe this year, an increase of 63% on the total of €93bn for 2014, according to analysis from Deloitte. This is driven by increased loan sale activity in continental Europe, particularly in Spain, Italy (with a 190% expected increase in loan sale values) and Central and Eastern European countries (where loan sales are expected to quadruple compared to 2014).

This year did get off to a slow start, with only €35bn of sales completed to date, but there is a further €75bn of ongoing transactions and another c.€42bn of loans rumoured to be brought to market before the end of the year. 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:

“2014’s figure was already a three-fold increase on 2013’s, and we expect to end this year even higher. 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. We expect to see the market drift away from Britain and build further in Spain, Italy and Central and Eastern European Countries (CEE).

“In the past, these sales have been driven by commercial real estate loans, but now we are seeing more residential mortgages being sold off in improving markets and the emergence of SME corporate debt packages. This year sales by UKAR and GE are boosting numbers in the UK, underpinning the residential mortgage focus of that market. Distressed debt investors and challenger banks are willing to step up and buy these loans, be they non-core or non-performing loans, on the basis they will start performing in future as the economy improves.”

Deloitte estimates loan sales to top £35 billion (€48bn) in 2015 in the UK, €21bn for Italy, €22bn for Spain, €8bn for Austria and CEE and €29bn for Germany.

David Edmonds concluded: “Notwithstanding the recent wobble in the equity markets, appetite remains unabated for European debt pools. Looking further ahead, we expect sales will only 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 Market Update (H1)” report, which is also available from Deloitte.

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