European Banks Selling $40B of Assets
European banks are planning to sell over 30 billion euros ($40 billion) of assets in order to raise capital.
According to KPMG LLP, European lenders are accelerating asset sales after having already disposed to 26 billion euros worth of loans this year alone. While the 30 billion-euro figure is lower than had been anticipated, regulatory pressures and a deepening of the sovereign debt crisis are forcing lenders to accept lower prices, according to a KPMG report.
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“Counter-intuitively, we saw a lower-than-expected level of bank disposals of loan portfolios in the first few years after the collapse of Lehman Brothers Holdings Inc.,” said Andrew Jenke, director in KPMG’s Portfolio Solutions Group. “But we are now starting to see banks — faced with the triple-whammy of sovereign debt crises, increased capital requirements and a funding mismatch — under a lot more pressure to extract value from their loan books.”
Royal Bank of Scotland (NYSE:RBS), Banco Espirito Santo SA, and Dexia SA are among the banks planning to sell assets because of regulatory pressure to shrink their balance sheets and boost liquidity. U.S. private-equity firms and hedge funds have raised more than $5 billion in funds to buy distressed European assets at what they see as a discounted price. During the 2002 recession, American P-E firms and hedge funds raised only $400 million to buy distressed assets and corporate turnarounds.
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Banks in the U.K. and Ireland are the biggest sellers, according to KPMG. In July, RBS aggreed to sell part of a 1.4 billion-pound portfolio of commercial loans to Blackstone (NYSE:BX). Lloyds (NYSE:LYG-A) is selling a 6 billion-pound portfolio of shipping loans, and Anglo Irish Bank said in August that it expected to complete the sale of $9.65 billion of U.S. real estate loans.