IFR International - 21.07.2018

Top news

Spain spearheads surge in European NPL sales

„ People & Markets Bank of Cyprus, RBS, Sabadell, UniCredit, UBI Banca all line up more NPL deals

BY STEVE SLATER

Sales of non-performing loans

by banks in Europe are surging,

with another mega-deal from

Spain’s SABADELL arriving last

week, as pressure to continue

cleaning balance sheets and

strong private equity buying

interest encourages deals.

European NPL sales hit a

RECORDûINûTHEûlRSTûSIXûMONTHSûOFû

the year on the back of deals in

Spain, and that continued on

Thursday when Sabadell sold

two portfolios of real estate

loans with a gross book value of

õBNûTOû53ûPRIVATEûEQUITYûlRMû

Cerberus.

Last month CAIXABANK struck

the biggest deal of the year

when it sold assets with a face

value of €12.8bn to Lone Star.

Since SANTANDERûOFmOADEDûAû

õBNûPORTFOLIOûTOû"LACKSTONEû

last year, its domestic rivals

have stepped up plans and

folded more NPLs into huge

portfolio sales.

Around €45.9bn of real estate

PORTFOLIOSûWEREûSOLDûINûTHEûlRSTû

six months of this year, just

eclipsing the previous highest

lRST

HALFûTALLYûINûûACCORDINGû

to analysis by Evercore’s real

estate portfolio solutions team.

Evercore’s REPS team said

there were 11 deals with a face

value of more than €1bn in the

lRSTûHALFûANDûITûEXPECTSûACTIVITYû

levels to remain high over the

next six months, driven by deals

in Spain and Italy and an

increase in Greece.

"ANKERSûANDûREALûESTATEû

industry sources said more big

deals are in the pipeline from

"ANKûOFû#YPRUSû)RELANDSû

0ERMANENTû43"û)TALYSû

5NI#REDITûANDû5")û"ANCAû

'REECESû!LPHAû"ANKûANDûMAYBEû

Sabadell again.

“It’s a continuing clean-up.

"ANKSûAREûSTILLûHOLDINGûAûLOTûOFû

NPLs and it’s a long task,” said

Richard Thompson, head of

PwC’s portfolio advisory

group, which advises on NPL

deals.

Some banks that started

shedding assets soon after the

lNANCIALûCRISISûAREûSTILLûGOINGû

through the process. ROYAL BANK

OF SCOTLAND, for example, is

selling another portfolio of Irish

residential loans with a face

value of €1.6bn, dubbed “Project

Scariff” - named after a small

Banks and regulators in stand-off

over consolidation

„ People & Markets Each side waits for the other to make the first move

BY GARETH GORE, STEVE SLATER

European banks and their

regulators are locked into a

high-stakes game of “who blinks

lRSTvûWHENûITûCOMESûTOûPOSSIBLEû

consolidation within the

banking sector, with each

waiting for the other to make

THEûlRSTûMOVEûINûWHATûMANYûSEEû

as a long-overdue process.

Although the subject of

consolidation has gained

traction in recent months, with

possible tie-ups between Societe

Generale and UniCredit,

"ARCLAYSûANDû3TANDARDû

#HARTEREDûANDû$EUTSCHEû"ANKû

and Commerzbank all doing the

rounds, many senior bankers

say there is little appetite right

now to do deals.

)NSTEADûTHEYûPOINTûTOûOFlCIALSû

• and in particular Daniele
  Nouy, chair of the supervisory
  board of the European Central
  "ANKûnûASûTHEûSOURCEûOFûTHEû
  RECENTûlXATIONûWITHûBANKû
  consolidation, adding that
  banks feel they are being
  pushed into consolidation
  prematurely to meet the goals
  of politicians.
  Nouy has said there are too
  many banks in Europe, and has
  urged the industry to push ahead
  with consolidation. Although the
  number of banks in the EU has
  declined slightly since the crisis,
  there are still in excess of 3,
  institutions. More than half of
  those are in Germany.
  “She clearly wants more
  consolidation,” said the chief

lNANCIALûOFlCERûOFûONEûBANKû

linked with a big cross-border

deal. “Clearly there are too

many banks in Europe and

consolidation has to happen,

but regulation needs to change

lRSTû7EûDONTûSEEûANYû

advantages to doing a deal right

now.”

"ANKSûPOINTûTOûTHREEûMAINû

reasons for their reluctance to

enter into cross-border deals:

their inability under current

rules to transfer liquidity from

one country to another; the

additional capital requirements

of running a larger institution;

and limited synergies because of

operational differences between

countries.

“Consolidation is still a long

way off,” said a board member

at a second bank linked with a

big cross-border deal. “While

there might be some cost

savings on the retail side, there

are still too many of what I call

un-synergies. There are too

many regulatory disincentives.”

COLLAPSE IN DEALS

Europe has not seen a major

cross-border bank deal since the

ill-fated €71bn acquisition of

!".û!-2/ûBYûAûCONSORTIUMûOFû

2"3û3ANTANDERûANDû&ORTISûINû

2007. And the deals that have
      taken place have largely been
      rescue packages staged – or
      heavily directed – by
      governments keen to avoid the
      collapse of individual banks.
      Total bank M&A in Europe was
      US$26bn last year, with the

Note: By outstanding principal balance

Source: Evercore, PAI

110

100

90

80

70

60

50

40

30

20

10

0

Closed volume (OPB – €bn)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

H1 2018 closed volumes surpassed all

previous first half totals

2014 2015 2016 2017 H1 2018

CLOSED EUROPE NPL TRANSACTIONS 2014-PRESENT, IN €BN