Five reasons non-core loan sales volumes are up

Deleveraging of non-core European real estate debt was 60% higher in H1 2017, year-on-year, according to Evercore.

In total, €41.2 billion of legacy real estate loans and lender-owned property was sold across Europe during Q2 2018, up from €4.6 billion in the first quarter of the year, according to the latest figures published by investment banking firm Evercore.

That means the volume of non-core debt sold across Europe in the first half of 2018 was up by 60 percent, compared with the same period in 2017. Here are five reasons for the impressive recent sales volumes:

1. CaixaBank completed a massive sale. In a landmark Spanish deal in June, CaixaBank sold 80 percent of its real estate assets to private equity fund Lone Star for a gross value of €12.8 billion, which represents 28 percent of Europe’s total closed volume in the first half of the year. With further potential sales in the pipeline from Banco Sabadell and Sareb, Spain is set to continue as a leading market for property non-core sales in 2018.

2. More large deals are being closed. The average outstanding principal balance of sales rose to circa €1.5 billion in the first half of this year, with 11 deals having a face value greater than €1 billion. This ongoing trend of mega-deals started last year, when Spanish banks such as Santander and BBVA sold off their entire non-core real estate portfolios in a move to accelerate their deleveraging efforts.

3. The UK and Ireland story is not over yet. The UK accounted for €6.7 billion of the total non-core sales to date this year, the majority of which is attributed to residential mortgage sales by UKAR to Barclays and PIMCO in the so-called ‘Project Durham’. In a similar stage of the cycle, Ireland had €6.3 billion of recorded transactions, driven mainly by Lloyds’ €4.9 billion sale of its Irish mortgages to Barclays, PIMCO and M&G.

4. Italy is going strong. The Italian market remains active and accounted for a further €12.2 billion of closed sales in the first half of 2018. Italy had 10 completed transactions related to seven different vendors, which highlights the wide range of Italian banks with NPLs to deleverage.

5. Greece is emerging. The loan sales market in Greece continues to develop, with ‘Project Amoeba’ the first large secured loan sale completing in Q2. In the deal, Piraeus Bank sold €1.5 billion of NPLs to Bain Capital. The transaction had strong interest from investors, which may be a sign of things to come.