PwC estimates that non-core loan assets total €2.4 trillion, which is just €0.1 trillion less than at the beginning of 2012.
Despite the banks’ significant deleveraging efforts, the face value of lending that had been run off or sold was almost fully offset by the €500bn of new non-core loan assets added to the overall pool by banks during 2012. Nearly all of Europe’s top 50 banks now have a non-core division or equivalent.
Many markets have seen significant loan portfolio transactions over the last 12 months with the UK, Germany and Spain each accounting for around €10bn.
Richard Thompson, Chairman of PwC's European Portfolio Advisory Group, said:
"European banks are now becoming more transparent in relation to the size of their non-core portfolios and deleveraging efforts. The €500bn of new non-core assets identified during 2012, compared to the €600bn of loan deleveraging completed during the same year, confirm our estimate that the European deleveraging process will last for, at least, another ten years, and that loan sales are bound to increase further. Loan portfolio transactions reached €46bn in 2012 and we expect sales to increase to €60bn in 2013.
"There is also a real conflict with the desire from many quarters for banks to increase lending to stimulate the economy. Given that identified non-core loan assets make up around 5% of total banking assets, the deleveraging agenda could have a sizable impact on economic growth.
"If we look at potential loan portfolio transactions, PwC estimates there is only €70-€80bn of equity funding currently available in the market. This means that those banks that are first to market continue to have an advantage."
