Highest Year on Record for European Loan Sales
€129.5 billion of loan sales recorded during 2018
Southern Europe most active loan sales market in 2018
2018 saw another year of growth in the real estate loan sale market, with a total of €129.5 billion of real estate backed loan sales recorded during the year, according to the latest report by global real estate advisor, CBRE. This surpassed the previous record of €114 billion set in 2017, representing a 13.16% increase year on year.
Italy and Spain drove the market in 2018, contributing in excess of €94 billion of the total sales. Banks in these countries still have a significant stock of NPL loans to resolve and investors are attracted by the strong returns offered in these markets. Countries such as the UK and the Netherlands were advanced in quickly establishing their deleveraging programmes and so consequently banks in these markets are now left with less stock.
In a contrast to previous years, large loan sales dominated the market, with the average loan portfolio exceeding €1 billion. Of the 95 loan sales completed last year, 32 of these comprised a portfolio sized greater than €1 billion and of these 32 transactions, the average portfolio size of €3.27 billion.
CBRE expects loan sale activity to remain heavily concentrated in the Southern European countries in 2019, where considerable non-performing loan exposure remains on bank balance sheets. Countries are also under increasing pressure from their governments to deleverage as quickly as possible. There are currently 20 live transactions totaling €23 billion that are due to complete in H1 2019. Securitisation also played a large role in 2018 as an alternative to loan sales, a trend that is expected to continue into 2019.
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 2018. The recovery markets of Southern Europe, in particular, have gained real momentum in the past couple of years and we predict that they will continue to be the main driver of the market in 2019. This is coupled with securitisation which is becoming an increasingly popular disposal method as banks are put under increasing pressure to deleverage.