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Where next for legacy loan sales action?

Greece and Italy look like attractive countries in the sector.

Spanish banks are no longer driving sales of legacy real estate loan portfolios and lender-owned property in Europe. Many of them have deleveraged their non-performing real estate loans.

Only €4.5 billion of legacy Spanish assets changed hands in the first half of 2019, compared with more than €40 billion in 2018, according to the Q2 2019 European loan sales report by investment banking firm Evercore.

Italian banks currently lead the way. They sold €6.5 billion of real estate NPLs in H1, across 12 transactions from 10 vendors, thus highlighting the wide range of banks in Italy aiming to offload their non-core assets.

Looking ahead, investors who are keen to get hold of legacy loans should keep an eye on Greece. After years of inactivity, the country accounts for €7.4 billion of legacy debt currently on the market – 39 percent of Europe’s live total – though this does relate to a single transaction being marketed by Eurobank. Italy is also likely to remain a key market, with €2.6 billion of live sales, including three portfolios from UniCredit with a combined €2.5 billion face value.

“Activity in Greece is likely to pick up further, albeit the market is smaller than that of Italy,” says Federico Montero, Evercore’s managing director of real estate portfolio solutions. “Italian financial entities will remain the key vendors given the high volume of secured real estate non-core assets which they have left to address.”

The UK remains interesting, though most banks have sold their toxic loans. Activity has consequently shifted to the performing loan market, with Tesco Bank aiming to sell a
€4.3 billion book of residential mortgages.

As of mid-July, Evercore had tracked approximately €18.5 billion of live European NPL transactions and a pipeline of €26.2 billion of planned sales processes.