The single highest proportion of non-core loans sold by European banks last year were made to commercial real estate, according to the latest research by financial services firm PwC.
Banks sold €64 billion of non-core loans across asset classes last year, €18 billion of which was made to commercial real estate, the research revealed.
The overall figure for 2013 represented a 40 percent increase on the previous year, driven largely by a rise in sales by banks in the UK and Ireland, Spain and Germany, PwC said.
PwC predicted a further €80 billion in sales this year, and estimated loan portfolio sales closed (or in the process of closing) already this year total more than €30 billion.
However, European banks are still sitting on an estimated €2.4 trillion of non-core loan assets, the report warns, suggesting there is still significant headway to be made by the region’s banking community.
The ongoing reappraisal by banks of their balance sheets has led to the identification of additional orphan assets that have swelled the overall total, the report added.
UK banks accounted for more than a third of the 2013 total, offloading €23.5 billion of non-core loans.
“Transaction activity is fuelled by the continuing need of many European banks to reduce the size of their balance sheet and restructure their operations,” said PwC partner Richard Thompson in a statement. “Bank restructuring will continue over at least the next five years – with activity likely to be fuelled by the findings of the Eurozone-wide Asset Quality Reviews (AQRs) and stress tests currently underway.”
Private fund managers and hedge funds were the most active buyers of these assets last year, PwC observed. “We expect that to continue in 2014 due to the significant amounts of investment funds raised and the availability of debt financing, especially for more established players in the sector. We are in contact with over 150 investment groups looking to invest in the European market. For 2014, we expect property-backed lending to remain the most active asset class.”