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Portfolio Advisory GroupMarket update Q3 2015
October 2015
222 Portfolio Advisory Group | Market update
Richard Thompson
Global Leader, Portfolio Advisory Group PwC (UK)
European loan portfolio activity outlook and transactions in key markets
Welcome to our Q3 2015 market update. In this edition we see that 2015 is set to become the largest year for portfolio trades. During the first nine months of this year, transactions have been completed for portfolios with a face value of around €74bn, with €20bn completing in Q3 2015.
The European loan portfolio market is no longer a deal environment dominated by non-performing assets. As well as increased volumes, we continue to see an increasing trend towards performing portfolios, particularly in the residential mortgage space where investors are looking to securitisation as their favoured exit to take advantage of ever tightening spreads.
We expect to see this trend continue, particularly given the recent EU consultation on the Capital Markets Union (‘CMU’), which in the long term will potentially make it easier for EU domiciled businesses to access funding through the capital markets.
This, coupled with favourable debt markets has allowed investors to continue to gain significant leverage and to price portfolios more competitively than ever.
However, we continue to see ongoing shocks to debt capital markets, particularly following the recent stagnation in the Chinese markets, which has caused some investors to re-assess their bids due to facing potentially higher costs of funding from Asian financial institutions.
In addition to the c.€74bn of portfolio transactions already completed this year, European transactions currently in process total around €85bn, as vendors and investors look to close a number of key deals ahead of the holiday period.
With c.€39bn of deals still in progress in the UK, combined with the current completed deals in the UK of €29bn, 2015 volumes for the UK could reach close to €70bn, or nearly half of all expected portfolio deals across Europe in 2015. It is worth bearing in mind that, compared to the rest of Europe the UK market currently
has the highest proportion of deals comprised of performing assets, and hence we estimate that in 2015, around 60% of all investment in Europe in loan portfolios will have been directed to the UK.
As we head towards Q4 2015, we anticipate volumes for completed transactions in the year to eclipse 2014. We are already hearing of a number of Q1 2016 transactions being prepared for market and given the record volume of transactions in 2015, we see a market that is showing no signs of slowing down.
As always, I hope you find this Market Update informative and insightful. If you would like to discuss any aspect of the market please contact me, Jaime Bergaz or any one of our colleagues listed on the back page.
The loan portfolio landscape has continued to develop in recent years as investor appetite for performing loans has continued to gather paceSince 2012, the proportion of performing deals in the market (by UPB) has increased from 9% to 40% – we predict this could exceed 40% in 2016
Source: PwC analysisNote: Based on the location of the head office of the bank selling the assets
3Portfolio Advisory Group | Market update
9%
18% 20%
40%
0%
20%
40%
2012 2013 2014 2015 (9 months)
2015 volumes continue to grow as a result of competitive pricing and investor appetite for record deals We have seen a number of large US investors re-align their investment strategy towards Europe
Source: PwC analysisNote: Based on the location of the head office of the bank selling the assets
Note: ‘Specialised’ includes certain structured and asset backed products, shipping, infrastructure, energy and aviation
4 Portfolio Advisory Group | Market update
Value of Transactions by Loan TypeValue of Transactions by Country
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
20
40
80
100
120
140
160
60
Specialised, €1bn
SME/Corporate, €10bn
Unsecured Retail, €7bn
Secured Retail, €28bn
CRE, €28bn
Specialised, €1.5bn
SME/Corporate, €9bn
Unsecured Retail, €13.5bn
Secured Retail, €18.5bn
CRE, €48.5bn
Specialised, €17.5bn
Specialised, €14bn
SME/Corporate, €4.5bn
SME/Corporate, €3bn
Unsecured Retail, €15bn
Unsecured Retail, €10bn Secured Retail, €9bn
Secured Retail, €6bn
CRE, €18bnCRE, €13bn
In progress, €85bn
€46bn
€64bn
€91bn
Com
pleted
€159bn
The volume of CRE transactions has increased by €6bn from €22bn in our Q2 2015 update. A notable transaction was Project Churchill, a £2.7bn portfolio of UK real estate, thatwas purchased by a Lone Star for a reported £2.25bn.
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
20
40
80
100
120
140
160
60
Netherlands, €2bn
Netherlands, €2bn
Italy, €11bn
Germany, €15bn
Spain, €6bn
Ireland, €11bn
UK, €29bn
Italy, €7.5bn
Other, €4.5bn
Germany, €6bn
Spain, €21bn
Ireland, €30.5bn
UK, €21.5bn
Belgium, €11.5bn
France, €9bn
Italy, €5bn
Italy, €4bn
Other, €0.5bn
Other, €1bn
Germany, €10bn
Germany, €10bnSpain, €9.5bn
Spain, €9bn
Ireland, €2bn
Ireland, €3bn UK, €23.5bn
UK, €10bn
In progress, €85bn
€46bn
€64bn
€91bn
Com
pleted
€159bn
The UK remains Europe’s most activemarket with c.€39bn of deals still inprogress. including a number of largeticket transactions such as UKAR’s €13bn sale.
2015 year-to-date deals in key markets
IrelandUK
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
5
15
35
45
55
60
70
25
65
50
40
30
20
10
Specialised, €1bn
Secured Retail, €9bn
CRE, €11bn
Specialised, €0.4bn
Secured Retail, €6bn
CRE, €14.5bn
Specialised, €5bn
Specialised, €1bn
SME/Corporate, €1.5bn
SME/Corporate, €2bn
Unsecured Retail, €6bn
Unsecured Retail, €1bnSecured Retail, €6bn
Secured Retail, €0.2bn
CRE, €5bnCRE, €6bn
€10bn
€23.5bn€21.5bn
€68bn
SME/Corporate, €7bn
Unsecured Retail, €1bnSME/Corporate, €0.6bn
In progress, €39bn
The increase in SME/Corporate was primarily driven by Lloyds Banking Group’s sale of the reported €3.9bn Project Poseidon portfolio to a range of investors.
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
5
15
35
45
55
60
70
25
65
50
40
30
20
10Secured Retail, €4bn
CRE, €6bn
Secured Retail, €2bn
CRE, €25.5bn
SME/Corporate, €0.3bnUnsecured Retail, €1bnSecured Retail, €0.7bn CRE, €2bnCRE, €1bn
In progress, €8bn
€3bn
€2bn
€30.5bn
€19.5bn
SME/Corporate, €1.5bn
SME/Corporate, €3bn
Specialised, €0.5bn
NAMA has continued its deleveraging with the reported recent sale of the €2.5bn CRE portfolio (Project Jewel), which was purchased by Hammerson and Allianz Real Estate for a reported combined €1.85bn.
Source: PwC analysisNote: Based on the location of the head office of the bank selling the assets
Note: ‘Specialised’ includes certain structured and asset backed products, shipping, infrastructure, energy and aviation
5Portfolio Advisory Group | Market update
2015 year-to-date deals in key markets
SpainGermany
Source: PwC analysisNote: Based on the location of the head office of the bank selling the assets
Note: ‘Specialised’ includes certain structured and asset backed products, shipping, infrastructure, energy and aviation
6 Portfolio Advisory Group | Market update
Face
Val
ue (€
bn)
-
5
20
25
10
15
2012 2013 2014 2015 (9 months)
CRE, €10.3bn
Secured Retail, €0.5bn
CRE, €5.5bn
Unsecured Retail, €0.2bn CRE, €9bn
CRE, €5bn
In progress, €1bn
€10bn €10bn
€6bn
€16bn
Secured Retail, €4.3bn
Specialised, €5bn
Specialised, €0.4bn
Specialised, €0.5bnSecured Retail, €0.2bn
The German market remains fairly mature. However, we expect to see more non-core or non-strategic performing portfolios being brought to market in 2016.
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
5
20
25
10
15
Secured Retail, €4bn
Secured Retail, €8.2bn
CRE, €0.5bn
Unsecured Retail, €6bn
Secured Retail, €2bnSecured Retail, €3bn
In progress, €14bn
€10bn€9.5bn
€21bn €21bn
Unsecured Retail, €2bn
SME/Corporate, €0.7bn
SME/Corporate, €1.5bn
Unsecured Retail, €6bn
SME/Corporate, €1bn
Unsecured Retail, €8bn
SME/Corporate, €4.2bn
We fully expect the volume of completed transactions to increase significantly during Q4 2015, with a number of key transactions still in progress.
Source: PwC analysisNote: Based on the location of the head office of the bank selling the assets
Note: ‘Specialised’ includes certain structured and asset backed products, shipping, infrastructure, energy and aviation
2015 year-to-date deals in key markets
NetherlandsItaly
7Portfolio Advisory Group | Market update
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
5
20
25
10
15
Secured Retail, €5.5bn
Secured Retail, €0.7bn
Unsecured Retail, €2bn
Secured Retail, €0.2bn
Secured Retail, €2bn
In progress, €9.5bn
€4bn€5bn
€7.5bn
€21bn
Unsecured Retail, €4bn
SME/Corporate, €2bn
Unsecured Retail, €2.5bn
SME/Corporate, €1.5bn
Unsecured Retail, €5.5bn
SME/Corporate, €1.3bn
Specialised, €0.5bn
We expect 2016 to be another busy year with high levels of NPLs still to be deleveraged by Italian banks. The vast majority of the Italian sales relate to secured and well-seasoned unsecured non-performing portfolios.
Face
Val
ue (€
bn)
2012 2013 2014 2015 (9 months) -
5
20
25
10
15
CRE, €1bnSecured Retail, €0.5bn
CRE, €2bn
In progress, €0.5bn
<€1bn
€2bn
€3.5bn€3bn
Secured Retail, €1.5bnSME/Corporate, €3bn
We are seeing increasing appetite for Dutch banks to deleverage their NPLs and large PE investors are increasingly turning their attention to this market.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2015 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
151022-150844-DF-UK
Contacts
Richard Thompson+44 20 7213 [email protected]
Jaime Bergaz+34 915 684 [email protected]
AustriaJens Roennberg+49 699 585 [email protected]
Bernhard Engel+43 150 188 [email protected]
CEEJonathan Wheatley+40 212 253 645 [email protected]
CyprusStelios Constantinou+35 725 555 190 [email protected]
Czech Republic and SlovakiaPetr Smutny+42 025 115 [email protected]
DenmarkBent Jørgensen+45 39 459 [email protected]
FranceHervé Demoy+33 156 577 [email protected]
FinlandHarri Valkonen+35 840 539 [email protected]
Germany Christopher Sur+49 699 585 [email protected]
Thomas Veith+49 699 585 [email protected]
GreeceEmil Yiannopoulos+30 210 687 [email protected]
HungaryMiklos Fekete+36 14 619 [email protected]
Ireland
Aidan Walsh+35 317 926 [email protected]
ItalyAntonella Pagano+39 028 064 [email protected]
The NetherlandsPeter Wolterman+31 887 925 [email protected]
Joris van de Kerkhof+31 887 927 [email protected]
NorwayLars Johansson+47 48 161 792 [email protected]
PolandLukasz Bystrzynski+48 225 234 [email protected]
PortugalAntonio Rodrigues+35 121 359 [email protected]
RomaniaCornelia Bumbacea+40 212 253 [email protected]
SpainJaime Bergaz+34 915 684 [email protected]
Guillermo Barquin+34 915 685 [email protected]
Pablo Martinez-Pina+34 915 684 [email protected]
Richard Garey+34 915 684 [email protected]
Antonio Fernandez+34 915 684 [email protected]
SwedenPer Storbacka +46 855 533 [email protected]
TurkeyFatih Sahal+90 212 376 [email protected]
UkraineVladimir Demushkin+38 044 490 [email protected]
United KingdomRichard Thompson+44 20 7213 [email protected]
Robert Boulding+44 20 7804 [email protected]
Ben May+44 20 7212 [email protected]
Panos Mizios+44 20 7804 [email protected]
Patrizia Lando+44 20 7804 [email protected]
Christina Zarifi+44 20 7213 [email protected]
Natasha Firman+44 20 7212 [email protected]
North AmericaMitchell Roschelle+1 646 471 [email protected]
Asia PacificTed Osborn+85 222 892 [email protected]
Chiara Lombardi+65 623 637 [email protected]
James Dilley+85 222 892 [email protected]
Australia
Anthony Boswell+61 82 662 551 [email protected]
Latin AmericaNico Malagamba +55 119 9976 [email protected]
JapanMasahiro Komeichi+81 904 137 [email protected]
