LONDON: European banks are looking to sell billions of euros of loans in 2013 in an effort to clean up balance sheets, comply with capital requirements and reduce non-core client exposure.
German, Italian, Scandinavian and Austrian banks are the latest to focus on balance sheet reduction, approaching potential buyers of both performing and non-performing loans.
These banks are relative latecomers to loan portfolio sales, which have raised hundreds of billions of euros for Europe's cash-strapped banking sector as the eurozone crisis has hammered funding costs.
Most banks chose to sell loans or let them run down to free up capital rather than raise expensive equity.
"More banks are coming forward to sell large amounts of loans. German banks are considering selling, the Italians are being more proactive and there are smaller banks as well, such as the Scandinavians," a loan banker said.
Meanwhile, HSBC has been looking to sell more than $6 billion of US mortgages and other personal loans as part of an accelerated rundown of its troubled US loans book.
Last week, HSBC Finance Corp agreed to sell two portfolios of US consumer loans its personal unsecured loan and personal homeowner loan portfolios valued at around $3.4 billion for $3.2 billion to Springleaf Finance Inc and Newcastle Investment Corp.
"Banks are still coming out with assets to sell, and this is a mixture of good quality assets, non-core loans or special situations. Banks still need to strengthen and the quickest way to do this is to sell," a second banker said.
"Some banks have held off selling until now and perhaps they supported companies through the problems and restructuring, but they realise that now is the time to sell as the eurozone continues to have its problems."
Elsewhere, KPMG will attempt to sell many of the loans held by Irish Bank Resolution Corp, the former Anglo Irish Bank, before it is liquidated and transferred to the state-run bad bank, the National Asset Management Agency.
The sales will include a portfolio of corporate loans totalling up to 4 billion euros ($5.19 billion) and a portfolio of Irish property loans totalling around 2 billion euros.
UBS was mandated last year to assess the quality of about 2 billion euros of corporate loans held by IBRC and to gauge interest in a sale. KPMG is sounding out potential buyers and will look to sell the loans between May and August.
FOLLOWED ON
UK banks held the first portfolio sales in 2010 and were followed by peripheral European banks from Portugal, Greece and Ireland in early 2011.
By late 2011, banks from Europe's core were forced to sell loans in the face of soaring funding costs and a US dollar squeeze that made it uneconomic to hold low-priced loans.
BNP Paribas and Societe Generale sold a combined 150 billion euros of risk-weighted assets (including loans) as an alternative to raising capital.
In 2012, Spanish banks were the big sellers, with Banco Santander selling a 2.5 billion euro portfolio to Bank of America Merrill Lynch in October and BBVA selling about 1 billion euros of loans on an individual basis.
More recently, Austrian bank InvestKredit Bank sold a 350 million euro loan portfolio. Private equity firm Triton was a big buyer of the debt, which included a mixture of leveraged loans, corporate loans, bilateral and club deals.
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