- £8bn of deals in Q3 2011, £17bn currently in progress
- Private equity, pensions funds, insurance companies and traditional distressed debt buyers heating up deal market
The market for portfolios of bank debt has officially thawed in the UK, according to the second Global Debt Sales report from KPMG’s Portfolio Solutions Group. The report tracked around £8bn of deals in the third quarter of 2011 and expects around £17bn of deals to progress by the end of the year.
Graham Martin, partner and Co-Head of the Portfolio Solutions Group at KPMG, commented: "The impasse of buyer and seller expectations is coming to an end in the UK market, with a wave of billion-plus deals being agreed in the past few months. Banks have been prepared to take some pain now, including where the deal structure allows them to share in future returns with the acquirer.
“On the buy side, we are starting to see a serious number of strategic and financial purchasers actively pursuing and acquiring many of the non-core loan portfolios currently in the market. Most active of late have been many of the private equity funds who have recently seen supply increase rapidly in line with the uptick in bank deleveraging activities.”
Loan portfolio sales – key findings:
Sovereign debt crises are precipitating distressed sales of non-performing and non-core loans
Non-bank buyers of loan books are coming to the fore, increasingly moving up the learning curve and expanding capabilities;
Rapidly evolving regulatory reform – such as Basel III, Solvency II and the Independent Banking Commission’s report – is affecting activity;
Accelerated disposals of non-performing and non-core assets will become ever more necessary and prevalent across Europe as deadlines approach for the repayment of support loans;
Large loan to capital ratios in the large UK banks present huge buyer opportunities;
UK bank disposals have included a range of different portfolio types – consumer, residential mortgage and commercial real estate; and
Increasingly funding and funding providers is the key driver of non-core loan portfolio transaction success.
Martin went on to say: “Regulatory reform – in various guises – is having a highly influential effect on the level of loan book sales. In particular, Basel III puts pressure on banks to think of additional capital they might need to put aside for future losses. With banks looking ahead to how inevitable interest rate rises will affect the performance of their loan books, mandating disposals now may be more profitable than accounting for additional future capital requirements.”
David Sayer, Head of Banking at KPMG, added: “This feels like the start of the reshaping of the European banking market – with the emergence of “shadow banks” such that the market will begin to look more like the US market with credit intermediation being spread beyond the banks. This will create real challenges for regulators who are tasked with ensuring financial stability.”
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For further information please contact:
Sorrelle Cooper, Senior PR manager, KPMG: +44 20 7694 8527
Notes to Editors:
About the ‘Global Debt Sales’ report and KPMG’s Portfolio Solutions Group
The full report can be found on KPMG’s website at:
About KPMG’s Portfolio Solutions Group
The global Portfolio Solutions Group is made up of a core group of around 30 bank loan book specialists, who are based around the world and tap into KPMG member firms’ local expertise in over 145 countries. They advise banks on the sell side – helping them run sales processes and identify buyers - and advise investors on sourcing, valuing and reviewing portfolios on the buy side. (A more detailed description of the team’s experience and expertise is in the Global Debt Sales report.)
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 150 countries and have more than 138,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.