UK household debt to impact loan portfolio transactions – Q1 2016 market update
June 29, 2016
In the first quarter of 2016 the total value of loan portfolios having transacted, already in progress or close to being brought to market reached €88.5bn. This is almost two-thirds (62%) of the total value of loan deals that transacted during 2015. It’s therefore safe to say that there are no signs that the European loan portfolio market is slowing down.
Performing assets prevail
We estimate that there are still €2.3tn of non-core loan assets within the European banking system. Our latest report on the market gives our analysis of non-performing loans (NPLs) by country, showing that there’s around €1.1tn of NPLs held by banks across Europe.
Whilst the aggregate total of NPLs has not changed much, Irish, UK and Spanish banks, for example, have done much to resolve their balance sheets and continue to benefit from the ongoing economic turnaround. This has led to a significant reduction in NPL volumes* in these countries over the past year.
UK household debt to impact affordability
Although we estimate that UK NPL volumes** have fallen by around 30% over the past year, both unsecured and secured lending are rising once again with total household debt to income ratio projected to reach 170% by 2020. Increases in interest rates could impact affordability.
Elsewhere in Europe, Italian NPL volumes* have continued to increase. The development of the Government guarantee scheme, the creation of the Government backed “Atlante” fund, and the shortening of legislative proceedings will help to drive liquidity and investor appetite. For full details on the Italian NPL market click here.
Looking at deals completed and deals in progress, it seems that the Italian market has finally come well and truly alive – and in terms of volumes* could well top the table for 2016.
Outside of these markets, the Netherlands has also seen a significant increase in transaction volumes* (up 220%), is driven by a couple of ongoing high-profile transactions.
As always, I hope you find this market update informative and insightful. If you would like to discuss any aspect of the market please contact me, Jaime Bergaz or any one of our colleagues listed on the back page of the attached report:
*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.
** All references to ‘volume’ figures are calculated and expressed as ‘face value’.