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UK to lead Europe with £35bn in debt disposals

Assets on the block in the UK this year include UK Asset Resolution's Project Granite and GE Capital's home loan book.

UK banks are expected to sell up to £35 billion ($55 billion; €50 billion) of property debt this year, more than double 2014’s £14 billion.

The predicted figure should see the UK top this year’s European transactions table for real estate debt, expected to total around €120 billion, according to PwC’s latest portfolio sales market update.

“We see loan portfolios backed by real estate as continuing to be the most traded asset class, with around 80 percent of all transactions completed so far this year being either residential mortgages or lending backed by commercial real estate,” said Richard Thompson, global leader of PwC’s portfolio advisory group.

Germany saw the most sales by value in Europe for the first half of the year, with €18bn of property debt, but the UK is expected to pull ahead.

While only £9.5 billion of total UK debt was sold in the first half of 2015, an additional £30 billion-plus worth is currently on the market, including corporate and specialised loans.

The UK property debt portfolios still up for grabs include UK Asset Resolution’s £12.4 billion Granite Portfolio of residential mortgages and GE Capital’s £7.3 billion of UK home loans.

Irish bad bank NAMA’s €7.2 billion portfolio of mixed-use assets, named Project Arrow, and Spanish lender Bankia’s €4.2 billion real estate owned portfolio, called Project Big Bang, are among the largest portfolios outside the UK and Germany on the block.

Across Europe, total debt sales for 2015, including corporate and specialised loans, are expected to be close to €150 billion compared to €91 billion last year. About €75 billion is still up for sale.

“The interesting thing we’re seeing in the mix of assets traded is we’re seeing more performing loans and less non-performing loans now,” Thompson said.

Banks are deleveraging, but they’re also restructuring and saying, “we don’t want to be in a particular sector, even if we have performing loans sitting there,” he added.

Of the €2 trillion of debt estimated by PwC to be sitting on European banks’ balance sheets, about 50 percent are performing loans and 50 percent non-performing.