A record year for portfolio transactions – 2015 European loan portfolio transactions
March 09, 2016
During 2015 a total of around €140bn of transactions completed, an increase of around 50% on 2014 volumes. This makes 2015 the strongest year ever for portfolio transactions in Europe. With a number of transactions falling into 2016 and a strong pipeline of portfolios coming to market, I think we’ll have a strong start in Q1 2016.
Last year we saw a significant shift in investor appetite towards performing portfolios. This has mostly been in the secured retail mortgage market, where completed transactions have reached over €50bn of face value. This has mostly been driven by UK deals. I think that securitisation will be the main exit route for the vast majority of these deals. In terms of asset classes, commercial real estate has remained very popular.
UK & Ireland defy predictions
Although many commentators predicted a reduction in loan portfolio transactions in UK and Irish markets, they have been the largest markets in 2015. Transactions in the UK in particular were driven by large disposals from UK Asset Resolution (UKAR) and GE. I expect a number of significant transactions to occur in these markets in 2016.
Italy has experienced the most significant increase in transactions, with growth in excess of 150% over 2014, as the long awaited programme of deleveraging by Italian banks gathered pace. It will be interesting to see whether the introduction of the recent government guarantee will further accelerate the disposal programme. I am in no doubt that we will continue to see Italian transactions increase further in 2016.
Funding impact on bid-ask gaps?
It is possible that current volatility in the financial markets, combined with continuing pressures on the banking sector could have a material impact on the availability of funding in the loan portfolio market. This would lead to reduced pricing and increasingly unstable returns in a number of markets, as well as a widening in the “bid-ask” gap and ultimately, would result in a significant drag on transaction volumes.
Absent such factors, with approximately €100bn of deals currently in progress or close to being brought to market, we believe that 2016 will be another very active year for loan portfolio transactions, with transaction volumes at similar levels to 2015.
Where do you think investor appetite will lie in 2016? What will the main exit routes be? Which asset classes will be popular? Share your thoughts below or schedule a meeting to discuss your situation in confidence.