Despite the massive balance sheet deleveraging by many banks across Europe, the volume of non-core assets they hold has remained largely unchanged since the beginning of 2012, according to Price Waterhouse Coopers’ (PwC).
Many markets have seen significant loan portfolio transactions over the last 12 months with the UK, Germany and Spain each accounting for around €10 billion. PwC estimates that non-core loan assets now total €2.4 trillion, which is just €0.1 trillion less than at the beginning of 2012.
“European banks are now becoming more transparent in relation to the size of their non-core portfolios and deleveraging efforts,” said Richard Thompson, chairman of PwC's European portfolio advisory group.
According to PwC research, nearly all of Europe’s top 50 banks now have a non-core division or equivalent. The €600 billion face value of loans that had been run off or sold throughout 2012 was almost fully offset by the €500 billion of new non-core loan assets added to the overall pool by banks during the same period, PwC findings revealed.
“There is also a real conflict with the desire from many quarters for banks to increase lending to stimulate the economy,” added Thomson. “Given that identified non-core loan assets make up around 5 percent of total banking assets, the deleveraging agenda could have a sizable impact on economic growth.
Thomson predicts the deleveraging process will last for at least another ten years, and that loan sales are bound to increase further. “Loan portfolio transactions reached €46bn in 2012 and we expect sales to increase to €60bn in 2013,” he added.