PwC Report on Unloved European Loans
Europe's banks set to sell €100bn of 'unloved' loans in 2015Reuters

European banks could sell a record €100bn (£73.2bn, $109.2bn) of unwanted loans in 2015, according to consultants PricewaterhouseCoopers, breaking down a massive pile of €1.9tn of unwanted loans.

The sale of so-called 'non-core' loans by European banks is expected to rise by 10% this year, PwC said in a report published on 24 March. Lenders sold €91bn worth of loans no longer part of their main businesses last year.

However, it will take at least another five years for Europe's lenders to get rid of their problem assets, suggesting the clean-up will have taken more than a decade since the 2007/09 financial crisis, PwC said.

The €1.9tn of unwanted loans equates to about 4% of the industry's assets. Around half are non-performing loans, while the remainder are performing loans that banks do not consider part of their core businesses after changing strategy.

Private equity firms and other investors have over "€70bn to spend on assets being sold" by European banks. Competition for assets has raised prices, making it attractive for banks to offload assets, PwC added.

Italy's woes

PwC said in the report: "Italian banks hold more non-performing loans than any other European country, estimated by PwC to be some €185bn, which is roughly 15% of total non-performing loans across Europe.

"Significant growth is expected in the number of transactions in Italy and other countries in Central and Eastern Europe. Loan portfolio transactions in Italy in 2014 totalled just €8bn and PwC expect a total of more than €15bn in 2015."

Richard Thompson, global leader for portfolio transactions at PwC, said in a statement: "There remains very significant investor interest in acquiring banking assets as the sector continues its unprecedented and much needed restructuring. There is significant competition between the numerous investor groups looking to acquire assets and, as a result, we've observed price increases in the market, making it much more attractive for banks to sell assets.

"Our research shows that investors' return expectations are largely unchanged over the previous years, leading us to believe that investors are being more bullish as to their potential cash flow returns from these assets. In other words, more of the upside potential is being priced into these deals, particularly in the more liquid markets in the UK, Spain and Ireland.

"This trend favours the established investors in the market, which is likely to lead newer investors to focus on the emerging markets for loan transactions of, for example, the CEE region and Italy."