Debating Deleverage

European outlook for non core and non performing loan (NPL) portfolios

Following the financial crisis, PwC estimates that European banks are holding more than 1.3 trillion euros of loan assets that have been identified as non-core to their businesses. These loan portfolios consist of both performing and non performing loans (NPLs). Banks will spend the next 10 years either running off or selling these assets.

Banks have been deploying a number of tactics to deleverage, but the gap between buyers’ and sellers’ price expectations is still a significant barrier to more deals being done. As well as price, the high degree of strategic analysis and data due diligence required in a more circumspect business climate is significantly slowing things up.

PwC estimates that 2009-2010 levels of non-performing loans across major European markets increased by 15%, a lower rate than previous years, but still an increase of around EUR 100 billion.