Last year saw a return to growth in the loan sales market, with a total of €114 billion of real estate backed loan sales recorded during the year, according to the latest report by the global real estate advisor, CBRE. Despite being a record year for loan transactions, there are still circa €1 trillion of outstanding NPLs held by European banks across all loan types (secured, unsecured and corporate).
Despite a huge volume of NPL sales in 2017, the market was largely composed of small transactions. The top five transactions all related to portfolios in excess of €4 billion, accounting for €75 billion (66%) of total sales. Discounting these, there were an additional 93 transactions with an average portfolio size of €421 million. Additionally, a larger proportion of portfolio sales in 2017 were secured by residential assets, making up 46% of all sales compared to 30% the previous year.
Several countries, including the UK and the Netherlands, are now at the end of their programme of deleveraging non-performing loans and investor focus is moving towards less mature markets, such as Italy, Portugal and Greece which still have a significant stock of NPL loans to resolve.
Italy and Spain dominated the sales market in 2017; Spain closed the highest value of NPL sales with transactions totaling €52 billion whereas Italy was the most active market by volume with 33 transactions totaling €32 billion. The Spanish market was dominated by two large transactions which accounted for €43 billion of the total. Ireland remains the exception and still has a significant volume of loans to resolve, with the banks having withheld sales strategies in 2017.
Clarence Dixon, Global Head of Loan Services said “Loan portfolio trades by banks represent a key component of Europe’s economic rehabilitation and it is encouraging to see the uptick in volumes we witnessed in 2017. The recovery markets of Southern Europe, in particular, have gained momentum and we predict that they will continue to be the main driver of the market in 2018. We are currently tracking 20 live transactions totaling €25 billion that are expected to complete in the first half of this year, with the majority of these based in Italy, Portugal, Spain and Greece. Additionally, after a pause in activity in 2017, Irish banks are now back on track with their loan sales programme and are expected to bring sales in excess of €11 billion this year.