How did the European asset trading marketplace perform last year?
Well, market activity continues to grow year-on-year and shows no signs of abating in the short or medium term. Research by our Portfolio Advisory Group highlights that during 2015, a total of around €140bn of transactions were completed, which is an increase of around 50% on 2014 volumes. This has made 2015 the strongest year ever for portfolio transactions in Europe. A number of transactions will fall into 2016 and with a strong pipeline of portfolios coming to market we predict a strong start to Q1 2016.
And from a UK perspective?
Interestingly, although a number of commentators predicted a reduction in the UK and Irish markets, they have been the largest in 2015 – with the UK in particular being driven by large disposals from UKAR and GE. In particular at €54bn, traded volumes in the UK were 151% higher than 2014 when €21.5bn of deals were agreed. Securitisation structures are being used to provide funding for a number of these deals
Have there been any changes to the investor preference of portfolios?
We did note a shift in investor appetite towards performing portfolios which accounted for over 40% of all completed deals – we particularly saw a lot of activity in the secured retail mortgage market space. Here completed transactions reached over €50bn of face value and were mostly driven by UK deals. We believe that securitisation will be the main exit route for the vast majority of these deals. In terms of asset classes, commercial real estate has also remained a very popular asset class. European banks continue to hold around €2.3 trillion of unwanted, non-core and non-strategic assets, of which performing pools represent more than half of this amount.
Are there any factors that may impact on 2016 trading?
We’re seeing a lot of current volatility in the equities market and combined with continuing pressures on the banking sector it’s possible that they could have a material impact on the availability of funding in the loan portfolio market. This would lead to reduced pricing and a return in a number of markets to a sizeable “bid-ask” gap – which would be a significant drag on transaction volumes.
How is 2016 shaping up?
We think that with approximately €100bn of deals currently in progress or close to being brought to market, we believe that 2016 will be another very active year for non-core loan portfolio sales, with transaction volumes at similar levels to 2015. From a UK perspective, we’re also expecting a number of significant transactions in 2016.
The PWC Portfolio Advisory Group produce regular market updates – click here to read in full their Q4 2015 report.