Evercore: €63 billion in European loan portfolios sold in 2019

This total was recorded across 86 deals and represented a fall in closed volume of c.45% year-on-year, with levels of activity being lower than those recorded for four of the past five years. Unlike previous years where vendors have looked to complete sales before year end, Q4 2019 was comparatively quiet with €16.8 billion of deals closing (the lowest fourth quarter total since 2013). Furthermore, there was a significant reduction in the size of portfolios coming to market with the average volume of closed sales amounting to €733 million for 2019 compared to €1,127 million in 2018.

The slow-down in the European loan sales market is further highlighted by the fact that 15 “mega-deals” (face value greater than €1 billion) were recorded in comparison to 28 in the year prior, according to Evercore. A review of the closed transactions showed that 46% of the total related to residential mortgages, boosted by several transactions in the UK and Ireland.

A further 36% and 7% corresponded to CRE loans and REOs respectively. It is worth noting that many sales often contain a mix of CRE, residential, REO and/or unsecured elements, especially as the size of portfolios increases. Southern Europe continued to be the main focus of activity with Italy being the most notable market with c.€23.0bn of closed transactions in 2019. The majority of these deals involved securitisations, the deleveraging strategy favoured by banks since the introduction of GACS

As in previous years, activity in the UK and Ireland remained steady albeit with a high proportion of the deals relating to whole residential mortgage books. With the main Spanish banks having already completed the vast majority of their respective NPL deleveraging, Spain witnessed a considerable decrease in closed volumes over the past year. Just c.€9.5 billion of sales completed compared to over €40 billion in 2018, representing a reduction of 76%.

Surprisingly, the Greek secured NPL market did not accelerate as much as anticipated with c.€4.8 billion of transactions being recorded for 2019, a modest absolute increase from the €3.2 billion in 2018. However, activity is expected to increase significantly following the EU’s approval of the “Hercules” asset protection scheme which follows the GACS example set by Italy

Given the reduction in activity, just 15 “mega-deals” were recorded in 2019 with the top five sales accounting for €20.2 billion or 32% of the closed total. In comparison, the top five transactions in 2017 and 2018 amounted to €73.0bn and €42.2bn respectively

Notable sales in 2019 included:

  • Project Chester –c.€5.6 billion: UKAR successfully completed yet another sale of former Northern Rock mortgages, leaving the asset management agency with a residual portfolio which it will reportedly look to offload in the upcoming year;
  • Tesco Bank Mortgages –c.€4.3 billion: there were several whole mortgage book sales in the UK and Ireland in 2019 with the largest involving Tesco Bank’s sale to Lloyds Banking Group;
  • PrismaSPV Securitisation –c.€3.9 billion: In Italy, the largest transaction of the year involved UniCreditsecuritising a c.€6.0bn mixed NPL portfolio as it continued its deleveraging efforts;
  • Project Beech – c.€3.4 billion: The Irish lenderAIB completed the disposal of c.€3.4 billion of non-performing mortgages and secured business loans; and
  • Banca Popolaredi Bari Securitisation –c.€3.0 billion: The Italian bank completed a “capital relief trade” in mid-2019 in relation to a secured SME and residential mortgage NPL portfolio.

james.wallace@realassetmedia.com