Commerzbank expects to shrink its €14.5bn commercial real estate loan book by almost half by the end of 2016 after it successfully reduced the book by almost a fifth this week.
The German bank plans to sell or run-off between €6bn-€7bn of its commercial real estate debt, classified as non-core assets, in the next 12-18 months, taking its book down to around €8bn by the end of 2016.
The bank closed two large loan portfolio sales this week, with JP Morgan and Lone Star buying €2.2bn of European property loans and Oaktree Capital Management acquiring €700m of German loans.
No further large portfolio sales are expected this year but Commerzbank is considering individual sales of assets.
Its €14.5bn commercial real estate loan book is comprised of around €9bn of German debt of which about €900m are non-performing loans (NPLs). Other European countries total around €5bn, of which about €800m are NPLs, with loans originated in Portugal the largest component at €1.4bn.
Italy, Poland and France all had loan totals under €1bn. A number of other European countries, plus the US, had relatively small amounts.
The volume of NPLs left in Commerzbank’s book dropped to €1.7bn following the two recent portfolio sales, which saw about €1.3bn sold off.
Of those two portfolio sales, the German package contained loans made on a mix of assets, comprised mainly of non-performing loans. The European portfolio, which contained loans made on a mix of assets in 14 countries, comprised about two-thirds performing loans and about one third sub- or non-performing. They include loans on assets in Austria, Belgium, Czech Republic, Sweden, Romania, Switzerland, Slovakia and Turkey.
The portfolios were sold at a discount of just 3% in total, reflecting strong competition in the market for the assets. About a dozen investors bid for the European portfolio with US banks and US private equity firms the most aggressive. JP Morgan is thought to be providing finance for the pan-European assets.
“Both transactions show that we are continuing to press ahead with our value-preserving run-down, and that we are significantly reducing both risk and complexity,” said Sascha Klaus, divisional board member non-core assets commercial real estate at Commerzbank.
“In this respect we are taking advantage of market opportunities, in order to achieve best possible results through competitive bidding procedures.”
Commerzbank said the two portfolio sales would result in the bank saving around €105m in Q3.
The bank’s non-core assets also include loans made by its former shipping finance business.
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