Have prices peaked in the loan portfolio market?
May 20, 2016
| Click here for the PwC Portfolio Advisory Group Market Survey 2016 |
We have just completed our latest survey of participants in the loan portfolio market trading. This leading survey, now in its 6th year, provides a great insight into potential trends and likely future opportunities.
The market backdrop was discussed at our recent annual conference, attended by over 600 market participants. Our research shows that banks continue to hold near record levels of non-core lending (€2.3trn)*. Furthermore, total European NPL levels at the end of 2015 have not experienced any significant decrease, despite record level of transactions over the last 2-3 years.
Around three quarters of attendees at our conference believed that up to €1trn will trade by way of portfolio transactions. Around €140bn traded in 2015 and I estimate that 2016 will be another very active year for non-core loan portfolio sales. Transaction volumes are already at similar levels to 2015, with €120bn of deals currently in progress or close to being brought to market.
A word of caution
However, this comes with words of caution. The current volatility in equities, as well as continuing investor and regulatory pressures on the banking sector, could have a material impact on the availability of funding. Whilst investors did not see this as a barrier to trade in 2015, I think that such pressures could be a dampener to the currently buoyant market as we are seeing a general reduction of debt financing combined with increased pricing in some markets.
Our survey shows that Italy and Central and Eastern Europe are the two areas where investor interest has increased most. In 2015 Italy saw the most significant increase in transaction volume, with growth in excess of 150% over 2014. It remains to be seen what the impact will be of recent Government intervention.
It was surprising to see that Greece did not figure more prominently in our survey. I have just returned from a couple of days speaking with key banks there. I do expect this market to develop very quickly although I suspect that it will not be until 2017 that we see a material increase in investment opportunities.
Our surveys over the last couple of years have clearly shown that prices of assets have, in the main, been slowly increasing. Whilst survey participants do not predict a continuation of this trend, it does indicate pricing remaining at very similar levels to those seen in 2016, although in many markets and asset classes demand is likely to be higher than supply.
Get the full details in our survey report here
*This is a high level estimate based on public information concerning non core assets held and stated objectives around reductions in assets. There is limited information available as to the underlying nature of such assets. Consequently this estimate should be viewed as illustrative in nature only and the total amount is likely to include assets other lending.
About the survey
This market leading loan portfolio survey is the 6th annual survey we have undertaken. It provides an insight into the trends in the loan portfolio market to ascertain where investors are deploying their capital and where there might be future opportunities.
What do you think has most impacted access to funding? Which territories do you think investors are most interested in? Which asset classes are most attractive to investors? What are the key factors which have helped you determine whether to buy or sell a portfolio? Share your thoughts below or schedule a meeting to discuss your situation in confidence.
