The value of loan portfolios traded in Europe last year rose to £108bn (€140bn) last year, an increase of more than 50% on 2014.

Research published by PwC’s Portfolio Advisory Group shows that 2015 was the strongest year ever for portfolio transactions in Europe. 

Demand was particularly high in the UK where, at £42bn (€54bn), traded volumes were 151% higher than in 2014 when €21.5bn of deals were agreed.   

However, the volume of commercial real estate loan deals did fall from €14.5bn in 2014 to €12.5bn.

Transactions in the UK were driven by a small number of large disposals of UK mortgages. PwC said securitisation structures are being used to provide funding for a number of these deals. 
Italy saw the most significant increase in transactions, with growth in excess of 150% over 2014, driven by a deleveraging programme by Italian banks. 

Last year saw a significant shift in investor appetite towards performing portfolios, which accounted for around 40% of all completed deals. 

PwC estimates that European banks continue to hold around £1.8tn (€2.3tn) of unwanted, non-core and non-strategic assets, of which performing pools represent more than half of this amount. 

Richard Thompson, global leader of PwC’s Portfolio Advisory Group, said:  “Market activity continues to grow year-on-year and our 2016 research and pipeline shows the market has no signs of abating in the short or medium term. 

“It is possible that current volatility in the financial markets, combined with continuing pressures on the banking sector, could have a material impact on the availability of funding in the loan portfolio market. 

“This could lead to reduced pricing and a return in a number of markets to a sizeable ‘bid-ask’ gap – which would be a significant drag on transaction volumes. 

“However, absent such factors, with approximately £77bn (€100bn) of deals currently in progress or close to being brought to market, we believe that 2016 will be another very active year for loan portfolio transactions, with transaction volumes at similar levels to 2015.”