Poll: two thirds of investors believe banks are selling distressed assets

Nearly 64 percent of investors polled by South African bank and asset manager Investec believe banks have either already begun releasing their distressed assets back into the market or will start over the course of the year.

Investors believe by a majority of two to one that banks have already started selling distressed assets into the market or will do so over the course of 2011, according to a poll.

Investec, the South African bank and asset manager which is listed on the London Stock Exchange, asked 146 senior UK property professionals in December 2010 for their views on the market.

The most significant conclusion of the poll, released today by Investec’s Specialist Private Bank’s Structured Property Finance division, is that while many banks have been holding onto large volumes of distressed assets in order to repair their damaged balance sheets, the majority of property professionals believed the release of these assets was underway or imminent. Indeed, only one in five (18 percent) predicted that banks would delay this process until 2012 while just 8 percent doubted it would start before 2013.

Most respondents believed lenders would prefer to exit as soon as they were in a position to recover their debt. In contrast, one in four (27 percent) said lenders would prefer to continue working with their clients to maximise the sale price of the property at a later date. That 27 percent figure has fallen by 12 percent over the past 12 months, Investec said. 

In a statement accompanying its study, Investec said lenders who opted to exit once their debt was back in the money risked damaging the client relationship.

Gary Dobson of Investec’s Structured Property Finance division said: “A year ago many banks were choosing to sit tight. But sufficient time has passed now for the worst affected banks to have assessed the full extent of their exposure to the property sector. We’re already seeing banks releasing more stock onto the market at an impaired level in a bid to reduce their overall exposure to property.”

He added: “However, not all lenders are choosing to offload mothballed stock back into the market and have developed an alternative approach, which has involved getting their hands dirty and partnering the developer, or where they have gone into liquidation, injecting more equity into the scheme and doing the developing job themselves.  As lenders start to reappear on the scene again, developers will no doubt be questioning whether the banks’ claims to offer old fashioned 'relationship banking' really stack up.”