European loan sales increase by 35% reaching €144 billion last year

The European loan portfolio market picked up pace in the second half of 2017, after a relatively slow first half, according to statistics published by global firm Deloitte.

The new analysis shows that while just above €40 billion worth of deals were concluded by mid-2017, the full year total went on to reach €144 billion. This exceeds the record amounts for 2015 and 2016.

Some large one-off deals provided much of the value for 2017’s deal activity. These include the €30 billion portfolio sold by Santander following its takeover of Banco Popular, the €17.5 billion Project Ripon from UKAR and the €12 billion Project Marina from BBVA.

Andrew Orr, Global Head of Transactions of portfolio lead advisory services at Deloitte, said: “Last year has seen the largest single transactions since the onset of the financial crisis. Looking ahead, we expect another very active year in the Irish, Italian and Spanish markets, and we expect Greece to be more prevalent.

“With €52 billion in reported ongoing transactions and a busy deal pipeline, 2018 is set to be another eventful year, with total volumes likely to exceed the €100 billion mark for the fourth year running.”

Spain recorded €51.7 billion of NPL sales in 2017, followed by €47.3 billion in Italy and then €21.8 billion in the UK. Although Europe has traditionally been the centre for the NPL markets, NPL markets in Asia and South America are emerging. There is currently NPL levels of approximately $520 billion in Asia, with an estimated $160 billion in Brazil.

Andrew Orr concludes: “According to the latest EBA transparency exercise, NPL ratios in one-third of the 25 jurisdictions covered by the survey are still above 10%, and the absolute levels of NPLs remain high at €893 billion. In the UK and Ireland banks are now focusing on their non-core assets and have started to sell performing loan books. 20% of the 2017 deal volume was sales of performing loan portfolios, up from 9.5% in 2016. This will continue into 2018.

“Also, regulatory pressure continues to build and with the adoption of IFRS 9, we are going to see more proactive balance sheet management on an ongoing basis.”