European Banks Set to Trade €60bn in Non-core Loans in 2013

Non-core loan portfolios with a face value of at least €60bn are expected to be traded by European banks in 2013 as they step up their deleveraging activity, according to predictions from PwC. The figure compares with around €45bn of such deals in 2012 and the €36bn recorded in 2011.

To date a large amount of loan portfolio transactions have involved real estate backed lending. In future, PwC expects an increased focus on corporate and leveraged lending, together with loans with a longer maturity profile.

However, the group adds that banks have some way to go at their current rate of disposal as it estimates that unwanted loan portfolios total more than €2.5 trillion across Europe.

Analysis by PwC’s European portfolio advisory group shows there has been an uptick of activity in the UK and Spain and considerable potential for deals still to be done across the eurozone as a whole. It expects this momentum of high value and volume of transactions to continue for the next few years.

“In 2012 we saw  a large number of different banks bringing their portfolios to market, trying to capitalise on first-mover advantage and recognising that basic laws of supply and demand mean that the higher the deal volumes in future, the lower the price,” said Richard Thompson, head of PwC’s European portfolio advisory group. “This issue of price will clearly remain a key challenge in future for sellers in countries that are already developing as more mature markets.

“We are also seeing greater transparency among many banks as to the scale of their non- core portfolios.  Looking forward, PwC’s own pipeline of potential transactions is the longest we’ve ever seen and we believe there will be an active market for at least the next five years, and probably a lot longer.”

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