Tuesday 21 November 2017

Investors still focus on Irish assets even as sales dwindle

Investors expect more loan portfolios to come out of Ireland this year. Photo: Bloomberg
Investors expect more loan portfolios to come out of Ireland this year. Photo: Bloomberg
Peter Flanagan

Peter Flanagan

Ireland will continue to see strong interest from overseas investors over the rest of 2016, but demand for Irish loan portfolios is expected to be at its lowest point in several years, a new report has found.

Data from accountants PwC shows that while investment firms are still interested in buying loan portfolios from the likes of Nama and Irish banks, there is now a sharp decline in investor interest here compared to previous years.

PwC's latest Portfolio Advisory Group Market Survey for 2016 shows that less than 5pc of investors expect to focus on deals involving Irish loans this year. That is down from 11pc in 2014.

Much of the Irish lown portfolio inventory - which is backed by property assets - have been sold down in the last four years or so. Given that pattern, there is a clear trend away from Ireland and to other European destinations, with the supply of Irish assets coming to the market now comfortably outstripping supply.

Nama has been particularly active in recent months, with three portfolios - Project Ruby, Emerald and Tolka - all currently on the market. Ruby and Emerald alone have par values of €4.7bn, although they could sell for as much as 90pc less than their par value.

While interest in Irish assets is now comparatively small, given the size of the Irish market compared to the rest of Europe, there is still enough demand for assets here for portfolios to sell at strong prices.

Instead of Ireland, PwC found investors now flocking to the likes of Italy, Spain and Eastern Europe.

PwC's Richard Thompson, who leads the firm's Portfolio Advisory Group, sees a strong pipeline of portfolio sales this year.

"Around €140bn traded in 2015 and we believe that 2016 will be another very active year for noncore loan portfolio sales.

"We are already seeing transaction volumes at similar levels to 2015 with €100bn of deals currently in progress or close to being brought to market.

"However, this comes with words of caution. The current volatility in equities, as well as continuing investor and regulatory pressures on the banking sector, have a material impact on the availability of wholesale funding. Whilst investors did not see this as a barrier to trade in Q4 2015, we expect market volatility and the availability of wholesale funding to place further stresses on deals in the market.

"Italy has experienced the most significant increase in transactions, with growth in excess of 150pc over 2014 and our survey reflects the increasing investor interest in this region.

"We see a similar level of interest in Greece and Central and Eastern Europe, which we expect to be an area of focus for investors in 2016.We expect the most successful investors will be those that partner with local servicers, who have the local knowledge and expertise to effectively service any portfolios," Mr Thompson added.

Nama has said previously the market for its assets remains strong, and a number of US firms have bid for its Ruby and Emerald portfolios.

Sunday Independent

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