European banks plan to sell $109 billion of bad debt in 2015 to reduce costs and rebuild their balance sheets, according to a PricewaterhouseCoopers LLP report.
Banks will offload troubled loans that no longer fit with their business strategies as prices rise, according to the report. The sale will be the biggest since Europes banks began downsizing after the financial crisis, according to approximately 60% of more than 60 banks, hedge funds and private equity firms that were surveyed for the report.
Soured unsecured retail loans are expected to fetch an average of 35% of face value, up from 30% last year. Secured debt, including mortgages, will jump to 49% from 29%. Performing commercial real estate loans are expected to sell at an average of 93% of face value this year, the most since at least 2012, according to the report.
Italian banks hold the biggest proportion of non-performing loans in Europe at an estimated $200 billion, or 15% of the total. They are expected to sell more than $17 billion in 2015, nearly double last years total, according to the report.
Scrutiny from the European Central Bank and regulators have prompted lenders to restructure and downsize operations since 2010, prompting more loan sales since that time. Thats provided a growing supply of assets for U.S. investment firms including Lone Star Funds, Apollo Global Management and Oaktree Capital Group LLC, which invest in distressed assets. Richard Thompson, a partner at PricewaterhouseCoopers in London, said there is plenty of investor interest in acquiring banking assets as the sector continues its "unprecedented and much-needed restructuring. There is significant competition between the many investor groups looking to acquire assets and, as a result, prices have increased and thus made it much more attractive for banks to sell, he added.