PwC predicts more European banks will sell non-core loan portfolios

4 December 2012

More European banks are likely to take the opportunity to dispose of non-core loan portfolios if ‘the price is right’, according to PricewaterhouseCoopers (PwC) as part of their on-going post-crash 'clean up' operations, ahead of the new Basel III capital adequcy rules and other post-2008 regulations.

Richard Thompson, European portfolio advisory group partner at PwC, commented on the wider prospects for the sale of European banks’ non-core loan portfolios, following recent reports that HSBC is ready to sell off some of the sub-prime US loans it still holds on its books.

“Transactions in non-core loan portfolios have steadily increased over the last few years, and so far in 2012 have exceeded most people's expectations,” said Thompson. “If things continue at the rate they have, the face value of loan portfolios traded in 2012 will have doubled from the €36bn last year and increased massively from the relatively low level of €11bn in 2010.

“This year we’ve seen a number of different banks deciding they have the opportunity to bring their loan portfolios to market, trying to capitalise on first-mover advantage. They have recognised that basic laws of supply and demand mean that the higher the deal volumes in future, the lower the price. This issue of price will clearly continue to be a key challenge for sellers going forward in those countries that are already developing as more ‘mature’ markets.

“There’s been an uptick of activity in the UK, Ireland and Spain and there’s plenty of deals still to be done across the whole eurozone, so we expect this momentum of high value and volume of transactions to continue for the next few years.

“However, some might say that given the need to deleverage, the rate at which deals are happening isn’t quick enough. It has taken the banks time to get their portfolios ready although various measures to inject liquidity into the banking system has provided breathing space for many lenders meaning the pressure to immediately deleverage portfolios has eased.”

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