LONDON —About 60 billion euros ($76.5 billion) has been raised to buy so-called noncore loan assets currently held by European banks, according to the accounting firm PricewaterhouseCoopers.
Investors are eager to take advantage of new regulatory requirements, which are leading the Continent’s financial institutions to cut back on riskier lending, particularly in the real estate and construction industries that have been hit hard during the financial crisis.
To date, however, few deals have been completed, as banks have been able to rely on cheap, short-term loans from the European Central Bank to prop up their balance sheets.
The injection of E.C.B. financing has lead many firms to balk at the large discounts investors are demanding to take control of the loan portfolios.
The number of deals is expected to increase over the next two years, as banks look to refinance the cheap loans provided by the E.C.B.
The potential buyers of European bank assets include major hedge funds and private equity firms. But other investors, including pension funds and cash-rich sovereign wealth funds, are also looking for bargains, according to Richard Thompson, chairman of the European portfolio advisory group PricewaterhouseCoopers.
Mr. Thompson says up to 15 percent of the 60 billion euros raised thus far has gone to pension funds and government-backed sovereign wealth funds, which are attracted to the billions of dollars of real estate assets that banks are trying to offload.
“There’s an enormous amount of interest,” he said. “This type of investor is looking for the better quality assets that provide long-term returns.”
Yet even with new investors joining hedge funds and private equity firms in the hunt for European financial assets, there are still too few potential buyers for the mountain of loan portfolios the banks want to shed.
In total, financial institutions have roughly 2.5 trillion euros of noncore loans on their balance sheets, or roughly 6 percent of total European banking assets, according to statistics from PricewaterhouseCoopers.
This year, Mr. Thompson says roughly 50 billion euros of assets will be sold, and a combined 500 billion euros of loan portfolios are likely to be offloaded over the next decade.
PricewaterhouseCoopers estimates that the 60 billion euros currently held by investors could be used to raise an additional 40 billion euros in debt financing.
But the combined 100 billion euro figure is still well below the value of assets that banks want to shed in the next 10 years. As investors focus on the most profitable assets that offer the best returns, financial firms may have to wind down — or write down — many of their loan portfolios.
nytimes.com
Investors are eager to take advantage of new regulatory requirements, which are leading the Continent’s financial institutions to cut back on riskier lending, particularly in the real estate and construction industries that have been hit hard during the financial crisis.
To date, however, few deals have been completed, as banks have been able to rely on cheap, short-term loans from the European Central Bank to prop up their balance sheets.
The injection of E.C.B. financing has lead many firms to balk at the large discounts investors are demanding to take control of the loan portfolios.
The number of deals is expected to increase over the next two years, as banks look to refinance the cheap loans provided by the E.C.B.
The potential buyers of European bank assets include major hedge funds and private equity firms. But other investors, including pension funds and cash-rich sovereign wealth funds, are also looking for bargains, according to Richard Thompson, chairman of the European portfolio advisory group PricewaterhouseCoopers.
Mr. Thompson says up to 15 percent of the 60 billion euros raised thus far has gone to pension funds and government-backed sovereign wealth funds, which are attracted to the billions of dollars of real estate assets that banks are trying to offload.
“There’s an enormous amount of interest,” he said. “This type of investor is looking for the better quality assets that provide long-term returns.”
Yet even with new investors joining hedge funds and private equity firms in the hunt for European financial assets, there are still too few potential buyers for the mountain of loan portfolios the banks want to shed.
In total, financial institutions have roughly 2.5 trillion euros of noncore loans on their balance sheets, or roughly 6 percent of total European banking assets, according to statistics from PricewaterhouseCoopers.
This year, Mr. Thompson says roughly 50 billion euros of assets will be sold, and a combined 500 billion euros of loan portfolios are likely to be offloaded over the next decade.
PricewaterhouseCoopers estimates that the 60 billion euros currently held by investors could be used to raise an additional 40 billion euros in debt financing.
But the combined 100 billion euro figure is still well below the value of assets that banks want to shed in the next 10 years. As investors focus on the most profitable assets that offer the best returns, financial firms may have to wind down — or write down — many of their loan portfolios.
nytimes.com
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