global-dept-sales-september-2011v2

LOAN PORTFOLIO ADVISORY

Global Debt Sales
Portfolio Solutions Group

kpmg.com

KPMG INTERNATIONAL

© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Foreword
The debt sales market has become positively exhilarating since our first edition of
Global Debt Sales just six months ago. The world is slowly but surely pulling itself
out of the deep recession that followed the global financial crisis. But while some
countries are faring reasonably well, others have seen their debt – both public and
private – skyrocket to unmanageable levels.
The result has been a series of government regulations and business strategies
that have reshaped the debt sales markets in many jurisdictions. And as the specter
of sovereign debt defaults continue to circle EU countries in particular (including
Portugal’s mid-summer debt downgrading to junk status by Moody’s), many pundits
and industry observers are forecasting even greater levels of debt sales (particularly
non-performing portfolios) in the near future.
In the midst of all of this, KPMG debt sales and portfolio services experts from
around the world have come together to create the second edition of Global Debt
Sales. As part of this ongoing publication series, KPMG’s global Portfolio Solutions
Group (PSG) will continue to examine recent debt portfolio activity in a number of
key banking markets across Europe, the Americas and Asia-Pacific. We’ll look at all
types of ‘non-core’ debt sales, including performing and non-performing loans from
around the globe, and will strive to provide high-level insights into trends and new
opportunities on the horizon.
With extensive experience advising both sellers and buyers on hundreds of
mandates globally, our senior team of loan portfolio professionals work alongside
government and financial institutions, private companies, strategic and financial
investors, debt collection agencies, industry financiers and other professionals
to understand the specific issues facing each market. More and more, our clients
look to us to provide a combination of strategic options analyses of portfolios and
platforms, along with robust market sounding exercises with our extensive investor
network to deliver quality solutions from both a country and global perspective.
We hope to once again share some insight with our readers in order to help market
participants cut through the complexity of global debt sales and maximize the value
of their loan portfolio positions.
We encourage you to contact the authors of this publication, or your local KPMG
member firm to discuss any of these issues or insights in more detail.

Graham Martin Stuart King
Partner, London Partner, Madrid
M: +44 78 2519 6802 M: +34 914 56 82 69
E: grahammartin@kpmg.com E: stuartking@kpmg.com


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Contents
Trend Watch 02
Basel III 02
The rebirth of the EU Securitizations Market 03
Introduction to Europe 06
United Kingdom 08
Ireland 12
Germany 16
Spain 20
Italy 25
Portugal 27
Poland 32
Russia 35
Spotlight on Africa 38
Introduction to Americas 42
The United States 44
Brazil 51
Mexico 53
Argentina 55
Introduction to Asia 57
China 58
Korea 61
Japan 64
Australia 67
Thailand 69
Taiwan 72
Indonesia 75
India 78
Malaysia 81
KPMG’s Portfolio Solutions Group’s Service Offering 84
Glossary of Acronyms 86

Global Debt Sales | 1


Trend Watch

Basel III – the straw that breaks resources become trapped in national
markets. Many institutions are now
the camel’s back
actively re-evaluating their balance
“While Basel III hasn’t
For the better part of three years,
sheets and deciding which portfolios yet sparked a flurry of
industry commentators and market
pundits had been predicting a flood
make sense to keep, and which they activity in the debt sales
should sell.
of debt sales from banks. Indeed, the market, there’s good
signs all pointed to an imminent sell While most of Europe is keenly awaiting reason to believe that it
off as banks struggled to overcome the the transposition process of Basel III
effects of the economic downturn and into European Directive and Regulation is just a matter of time.”
meet the increased regulatory capital (after which it will move on to national
demands now being put on them by legislation), the key elements of Basel III
regulators. The deterioration in quality are already fairly clear. They include: timeframes will apply to many of the
of some banks’ portfolios added more key elements.
• increased capital ratios (with a
fuel to the fire as the combined impact
particular focus on the need for good But the Basel III capital ratio also
of increased capital requirements and
quality, loss-absorbing equity capital); effectively amplifies the existing issues
impairment charges seemed to point
to the need for capital constrained • increasing quality of capital in the current calculation of Basel II
organizations to find some exit route. requirements with a focus on risk weighted assets. As a result, firms
harmonization across borders; are increasingly looking to optimize
their Basel II credit risk models and
So what has happened recently? • new leverage requirements calculations, and are analyzing their
Proposed in December 2009 and agreed (effectively capping the absolute portfolios in light of the level of pricing
by the G20 and the Basel Committee size of balance sheets in relation to and performance that can now be
in December 2010, Basel III outlines capital, irrespective of risk); achieved in the market.
the significantly increased capital and
liquidity requirements for banks. Basel • new measures to improve Systemically important financial
III also differs from its predecessor counterparty risk management institutions (SIFIs) are under even more
(Basel II) by taking a different regulatory (largely focused on collateral pressure, with further enhanced capital
approach: where Basel II strove to management and stress testing); and ratios expected (some anticipate an
increase risk management standards • new liquidity requirements to both add-on of up to 3 percent, taking
by offering the ‘carrot’ of reduced ensure firms hold sufficient high minimum common equity Tier 1 ratios
regulatory capital requirements, the quality liquid assets to meet short- up to 10 percent). This will result in even
approach taken by policy makers in term shocks, and to encourage a greater pressure on balance sheets from
Basel III has been to focus much more restructuring of the balance sheet both a funding and capital perspective.
on across-the-board increases in capital with a focus on matching off It should also be remembered that
and liquidity requirements. long-term funding sources against Basel III is only one element of the
What’s more, regulators are increasingly longer-term assets. rapidly evolving regulatory framework,
taking a more national approach, Much of the media focus has been and many firms are now dealing with
effectively pushing institutions centered upon the increased capital a raft of new or proposed regulation
towards creating subsidiaries rather ratios within Basel III and the extent on a wide variety of issues including
than encouraging branches and home to which organizations will (or will not) the impacts of new proposals on crisis
state supervisors to act appropriately. meet these ratios. The market should management, regulatory reporting,
The result is further pressure on keep in mind, however, that transitional and trade reporting (not to mention the
already-strained capital and liquidity, as implications of the UK’s Independent

2 | Global Debt Sales


Commission on Banking (ICB) final either directly or indirectly through some European RMBS issuance is recovering
report that has now been issued). form of securitization-like structuring. Despite the financial crisis, Europe
has seen an overall continuation of the
So where will it all end? The rebirth of the EU issuance of Asset Backed Securities
Undoubtedly, there is now significant securitizations market (ABS), albeit at lower levels than before,
pressure on banks’ balance sheets. and often supported to a significant
There is no doubt that investors
Across the globe, bank executives are degree by public institutions (such as
around the world have grown wary
now striving to understand the impact of the European Central Bank (ECB) and
of securitized products, particularly
regulatory change: what will their firm’s the Bank of England).
following the suboptimal performance
future business model look like? What of U.S. Residential Mortgage-Backed Interestingly, while total ABS issuance
areas of the business will continue to Securities (RMBS) that had been was increasing in 2007 and reached a
be profitable? And what strategy should backed mostly by subprime mortgages. record level in 2008, the volume that
they follow for both the investment and With investor appetite for performing was actually placed with investors
divestment of divisions, assets and EU RMBS also declining, this article was already in decline by 2007 and
subsidiaries? examines the resilient performance was nearly non-existent in 2008 and
So while Basel III has yet to spark of EU RMBS both during – and after – 2009 (see Figure 1). As a result, the
the flurry of activity that was widely the financial crisis. Indeed, EU RMBS demand for the remaining issuance
anticipated, a number of barriers remains a suitable funding instrument was primarily substituted by European
have started to fall away. For one, the for financial institutions, as well as an credit operations, for which retained
overall impact of Basel III is becoming appealing opportunity for investors. securitizations can be used as collateral.
clearer. There are also signs that a
more normalized loan portfolio market
is returning and that the economic
situation is working its way through Figure 1: Retained versus public issuance
to impairments. And once these
challenges are sorted out, there is 100% 900
827
good reason to believe that Basel III
Public issuance as percentage of total

90% 800
will eventually trigger further portfolio 287
80% 700
rationalization and debt sales.
Issuance EUR Billions

70% 308
Of course, all of this leads to the obvious 612 77 600
510
question of whether there are – or will 60%
450 500
be – any buyers in the market for these 50%
815
portfolios. One peculiarity of regulatory 400
40% 389
driven change is that it applies the same 300
pressures (in the same direction) to 30% 510 325 441
the entire banking industry at once. 20% 200
So while there may be pressure to sell 28
10% 81 100
off those capital and liquidity hungry 12 9
portfolios, there may be few banks lining 0% 0
up to buy them. In this environment, it 2006 2007 2008 2009 2010 2011
should not be a surprise if many of those Public (%) Retained (%) Issuance
less desirable portfolios are eventually
Source: European ABS & CB Research, J.P. Morgan
transferred out of the banking industry,



In Focus: Comparing European RMBS performance to the U.S.
The knock-on effect from the weak rates did not rise above 3 percent their U.S. counterparts: the first is that
performance of U.S. RMBS is not through the global financial crisis. European households tend to have a
only unfortunate, but undeserved. In contrast, U.S. delinquency rates lower average level of indebtedness
Performance of RMBS in Europe was started to rise at the end of 2008, hitting (as measured by lower debt-to-income
solid during and after the crisis with recorded delinquency rates of above and higher wealth-to-income levels),
EU RMBS outperforming their U.S. 10 percent in 2010. which made euro area households
counterparts in both delinquency levels less sensitive to income or interest
The downgrade rate shows similar
and downgrade rates (see Figure 2). rate volatility. The second is related to
trends, with European prime RMBS
Looking at delinquency levels in averaging just 4.3 percent over the stronger personal bankruptcy and duty
particular, evidence shows that the 2007–2010 period, where U.S. RMBS of care laws in the euro area, which
underlying assets of EU RMBS have averaged an astounding 40.1 percent. provide less incentive for borrowers to
performed better than those of U.S. default on mortgages.
RMBS, and – with the exception of Irish There are two main reasons why EU
prime RMBS – European delinquency RMBS perform better compared to

Figure 2: RMBS Prime 60+ Delinquency is worth noting that these issues have
occurred in countries with limited
12
sovereign risk and relatively robust
economic conditions. What’s more,
Delinquency 60+ [% of CB]

10
these collateral types are generally
8 perceived as bearing low risk when
compared to other products such
6 as Commercial Mortgage-Backed
Securities (CMBS). And according to
4 the ECB, investors seem to look for
transparent and simple structures, low
2
collateral risk and a good reputation of
the originators.
0
Jan-07

Apr-07

Oct-07

Jan-08

Apr-08

Oct-08

Jan-09

Apr-09

Oct-09

Jan-10

Apr-10

Oct-10
Jul-07

Jul-08

Jul-09

Jul-10

RMBS will inevitably remain one of
the most important funding sources
Dutch Prime Greek Prime Irish Prime Italian Prime Over the past decade, the market has
Portuguese Prime Spanish Prime UK Prime U.S. Prime seen European financial institutions
slowly shift from traditional deposit
Source: Moody’s Investors Service
funding of mortgage lending towards
more capital market-based funding.
But in 2010, securitizations came back Investor appetite primarily focused
Indeed, by the end of 2007 around 21
in favor, when about 21 percent was on high quality collateral
percent of housing loans were financed
publicly placed. Year-to-date figures Investor interest in these assets has through RMBS and covered bonds2.
(27 percent publicly placed)1 seem not been universal, however, with the With RMBS playing such a significant
to indicate that investor demand will largest share of the placed issuance role in the current funding structures
continue to recover. coming from prime RMBS from the of financial institutions, we believe
Netherlands, the United Kingdom and that their use is critical in restoring
Italy, along with German auto ABS. It the funding to markets. In fact,

1. European ABS & CB Research, J.P Morgan
.
2. “Housing finance in the euro area” European Central Bank, March 2009
,



Figure 3: Downgrade rates this, the upcoming Solvency II regulations
will also restrict EU insurance companies
80%
74.7% from investing in securitizations unless
70% the originator complies with the new 5
percent retention requirement. In effect,
12 month downgrade rate

60% this is expected to lead to renewed focus
54.3%
from originators on the longer-term
50% 47.4%
43.9%
performance of the created securities. If
40% 37.3%
successful, these new requirements will
ultimately contribute to mitigating the
30.3%
30% incentive of risk-taking and the easing of
24.2%
lending standards.
20%
15.6% 14.2% Other regulatory factors are also
9.4% 9.7%
10% influencing ABS in the EU. For example,
4.5% 3.1% 4.2%
1.1% the ECB intends to introduce loan-level
0%
2007 2008 2009 2010 data requirements as a condition of
eligibility in its central bank funding
EU Prime EU Non-Conforming U.S. HEL U.S. RMBS operations, and the Bank of England
Source: Moody’s Investors Service has published new transparency
requirements which issuers must comply
with if their asset-backed securities are
according to the IMF the restarting
, What is currently preventing
to remain eligible as collateral in funding
of securitization markets is critical to investors from putting more focus
operations in that jurisdiction.
limiting the fallout from the economic on RMBS?
crisis and to eventually enabling While the performance of European Furthermore, credit rating agencies are
the withdrawal of central bank and RMBS is recovering, investor appetite in changing their rating methodologies. In
government support3. 2010 was still only around 15 percent of January 2011, for example, Standard &
2006 levels, largely due to a lack of trust Poors updated its counterparty rating
The ECB4 goes further still, suggesting
in the market and overall volatility. At criteria to establish a more precise link
that securitizations will become
the same time, having been confronted between the rating of an issue and both
increasingly necessary due to a
with losses on investments that were the counterparty’s rating and type of
lack of alternative funding available
initially rated with an AAA rating, support provided.
to repurchase the repo-ed retained
issuances, the continued phasing out of investors have also lost some of their
government guarantees and the need to confidence in credit ratings assigned by Conclusion
refinance a large part of long-term debt rating agencies. Even though the performance of EU
over the next few years. This seems RMBS has remained resilient, the
borne out by the fact that by late August Changes in regulations and policy market is actively working on restoring
2010, European banks had EUR1.6 initiatives add to a better functioning trust in EU securitizations, not least
trillion of longer-term debt outstanding of the RMBS market as a vital funding source for the
that was due to mature between August A number of initiatives have been future. And while investor appetite for
2010 and December 2012, of which the undertaken by regulators and market European RMBS is certainly picking
Euro area accounted for EUR1.2 trillion. participants in an attempt to align up, it is still far from pre-crisis levels,
As a result, most banks will likely need the interests of all stakeholders due to a number of factors such
to issue new securities to redeem in securitizations. For one, the as the changing use of Structured
their maturing debt, particularly in incorporation of Article 122a in the Investment Vehicles (SIVs) by banks,
the Netherlands. Capital Requirements Directive aims to evolving regulations, ongoing distrust
address potential conflicts in the existing with respect to structures, and last
‘originate to distribute’ model by requiring but certainly not least, upcoming
originators and sponsors to retain at least Basel III requirements that will result
5 percent of the exposure. In line with in banks facing higher costs when
investing in future securitizations.

3. Global Financial Stability Report of September 2009
4. “EU banking sector stability” European Central Bank, September 2010
,



Introduction to Europe

Since the end of 2010, activity has To a large extent, this focus on CRE
started to gather pace in the European
debt sale market. An increasing
has been driven by the considerable
defaults already acknowledged (if
“Spain has been
number of banks have been sounding not reported) by many banks, and one of the hottest
out market interest for their portfolios
and – most pleasingly from buyers’
the knowledge that many of these
portfolios will require significant
markets in Europe
perspectives – several headline- hands-on, expert asset management so far this year, but
grabbing portfolio sale processes have
begun, continued and closed. Thanks
to avoid further deterioration. clearly questions of
largely to the diversity of European
This notwithstanding, one of the key
issues facing many of the European
sovereign debt and
debt sale markets, activity still remains
most prevalent in the non- and sub-
banks is their exposure to very thinly national defaults are
performing markets.
priced, late pre-crisis originated lending.
And while the vast majority of these
popping up across
Over the past few months, we have loans are classified as performing, they the EU and have the
noticed a growing interest in European
banks seeking to exit non-core markets
will present considerable challenges for
capital allocations going forward and
potential to drive a
and products with a particular focus on may see a lack of wholesale funding as significant level of
Commercial Real Estate (CRE) lending. LIBOR and EUROBOR rates increase. portfolio sales.”



Given the relative absence of foreign and
local strategic buyers, the emergence of
these ‘new’ buyers will be critical if European
banks are to successfully deleverage over the
next five years.

In this regard, many of the larger focus on searching for the ‘pools of to shed non-core and non-performing
portfolios of residential mortgage, liquidity’ that have, to this point, focused loans, and the impact of the Caja sector
project finance and infrastructure loans elsewhere. And while many of these restructuring is now starting to yield
(where pricing was particularly tight) investors have historically been active portfolio disposals and equity raisings. As
may be challenged. With many strategic in the RMBS/CMBS markets, or as LP such, opportunities for investors prepared
buyers now absent (or constrained) investors into specialized private equity to engage with financial institutions are
from the market, more creative funds, they are slowly changing their considerable. In the last few months
alternative solutions are often being investment mandates for such funds. alone, the market has seen an increase
considered. At the same time, strategic But increasingly, their attention is turning in the number of successful sales of real
buyers are becoming increasingly towards direct and indirect investments estate assets to buyers such as Cerberus
focused and can increasingly afford to in loan portfolios at palatable returns for and Fortress, and the progression of the
be more selective as higher volumes of both themselves and the vendors. Given current CAM loan process which involves
non-core assets hit the market. the relative absence of foreign and local the disposal of over EUR13 billion in non-
strategic buyers, the emergence of these core lending and real estate to a coterie
No ‘silver bullet’ ‘new’ buyers will be critical if European of financial investors. We expect that,
In all but a few markets and banks are to successfully deleverage over the coming months, this activity will
transactions, banks seeking to exit over the next five years. likely continue as sales in both big-ticket
non-core loan portfolios have yet ‘non-core’ portfolios and non-performing
to see the emergence of any real Eurozone debt crisis loans continue.
‘strategic’ buyers. But strategic and Recent discussions around European
well capitalized banks do exist and – bailouts have become ever more Poland is ‘very hot’
for the right opportunities – seem sensitive and market destabilizing, While many consumer non-performing
willing to expand (as was the case with the resulting lack of liquidity loan (NPL) markets have struggled
with Santander, which purchased combined with ongoing regulatory to (re)gain momentum following the
Bank BZK’s business in Poland and the reforms ensuring that the sovereign financial crisis, the Polish market has
Williams Glynn business from RBS debt issues currently being experienced gone from strength to strength. A
in the UK). will continue to provide negative number of existing and new foreign
repercussions for global growth and buyers remain in the market, but it
But the market must remember that –
the entire banking system for quite is the strength of local buyers (and
in many cases – CRE loans, thinly priced
some time to come. As deadlines their desire to grow volumes under
residential mortgages and PFI debt is
approach for the repayment of support management) that is providing local
often no more ‘core’ to potential buyers
loans, accelerated disposals of non- banks with an extremely attractive
as it is to potential vendors. That said,
performing and non-core assets will alternative to in-house collection
there have been a few instances of local
become ever more necessary and teams. This has led to pricing for non-
or foreign banks precipitating strategic
prevalent in the market. performing consumer loans in the mid-
portfolio acquisitions in order to expand
to-high twenties, driven by both cheap
in certain markets (such as Citibank
Spain is ‘hot’ local funding, and the comparative
to Barclays in the UK), but these have
Certainly the ‘hottest’ topic over the past advantage of investing in local currency
generally been the exception rather
six months has been Spain. Opportunity (the Polish zloty). That said, new foreign
than the norm.
funds are currently negotiating potential entrants remain interested in both debt
As frequent advisors to financial transactions across the Spanish debt and portfolio and collection opportunities in
institutions, we have seen an increasing equity space, local banks are seeking the Polish market.



United Kingdom

In comparison to the sluggish activity below), it is easy to see the potential
of the past three years, the UK debt
sale market has recently become
opportunity in this space. “The UK consumer
a hive of activity. We have seen Macroeconomic environment NPL market can go
a number of banks and financial
institutions begin formal sale
Interest rate rises will have a significant one of two ways;
processes for their loan portfolios,
impact on UK debt sales. Whilst short
term expectations are that interest rates
either a return to
while others have undertaken informal
market soundings in order to inform
will not increase, they likely to have the old markets
their boards in advance of potential
upward movement in the medium term.
But how will this economic environment
characterized by
future sales. To date, a considerable
chunk of this activity has related to
impact the valuation of a portfolio of small sales to local
(ostensibly) performing UK CRE loan
loans?
buyers, or into a new
portfolios, including a number of high
profile sales such as the formal CRE
Current low interest rates tend to
incentivize the voluntary prepayment
market dominated
processes by Bradford and Bingley of floating interest rate loans, with by large global
(discontinued), and RBS in Spain contractual clauses on prepayment
penalties and lock-out periods partially
investors.”
(now closed) and the UK (pre-closing).
But behind these headliners, there offsetting losses incurred by the lender.
are several other institutions already As a result, any rise in interest rates will prevalent in the riskier parts of a bank’s
engaged with external investors reduce this incentive, and likely trigger loan portfolio. As a knock-on effect, an
to gauge pricing and potential deal an increased number of defaults. This increased number of defaults could
structuring. Looking at the amount will be especially true if the increase further suppress market prices, thus
of NPLs, loans 90 days past due and in interest rates is coupled with a slow lowering the cash flows to the lender at
allowance for credit losses/NPLs recovery in the real estate market or liquidation, and increasing the pressure
for four of the UK banks (see chart the wider economy; and it will be more on a bank’s loan recovery rates.



To account for these higher than expected Figure 4: NPLs, loans 90 days past due and allowance for credit losses/NPLs
losses, lenders will need to set aside a for some UK banks
larger proportion of capital to meet the
risk provisioning requirements of their Allowance for credit losses/non-performing loans
expected defaults. When coupled with 51.1% 71.0% 26.7% 46.0%
higher portfolio management costs, 6,000 70,000
Loans 90 days past due and accruing

this can further adversely impact the 5,317
(a) 62,875
profitability to the lender. And while 60,000

Non performing loans (£m)
5,000
this will largely be factored into the
50,000
eventual transaction price, disposing 4,000
interest (£m)

(b)
of loan portfolios may still be the 3,446 39,231
40,000
most profitable approach to releasing 3,000 2,897
resources within a constrained capital 30,000
24,322
environment. 2,000
17,656 20,000

Vendors 1,000
10,000
From a vendor perspective, many of 401

the transaction drivers that existed six 0 0
Barclays HSBC Lloyds Royal Bank of
months ago remain valid (covered in (as of Sep 2010) (as of Dec 2010) Banking Group Scotland Group
more depth in the previous edition of (as of Jun 2010) (as of Dec 2010)
Global Debt Sales, January 2011). These Loans 90 days past due and accruing interest £m (a)
As of Jun 2009, Sep 2010 n/a
include the onset of Basel III capital Non-performing loans £m
(b)
As of Sep 2009, June 2010 n/a

requirements (see page 2), the need to Source: Capital IQ
comply with European Commission State
Aid requirements, and the ongoing focus
of UK banks on deleveraging, exiting non- Figure 5: Composition of total loan books for some UK banks
core markets/products and aligning loan 1,000
maturities with available funding.
900
In general, nearly all UK banks and 800 741.6
building societies are still focused on
consolidation rather than expansion. But 700 660.3

with muted market pricing feedback, 584.7
600
£bn

525.9
relative transaction inexperience and 500
a notable dearth of strategic buyers in 619.3
the market, there have been very few 400
535.4 483.7
successful ‘quick exits’. Indeed, banks 300 458.6
that have recently conducted transactions
200 17.7 152.9
(particularly those with larger performing
100 140.5 2.5
portfolios) have often felt significant 104.6
62.9
9.9 35.7
67.3 62.0 65.3
PL pain as a result of a transaction or 0
in advance of a sale. An examination of Barclays HSBC Lloyds Nationwide Royal Bank of
(as of Sep 2010) (as of Dec 2010) Banking Group Building Society Scotland Group
the composition of loan portfolios for five (as of Jun 2010) (as of Sep 2010) (as of Dec 2010)
large UK financial institutions reveals that Book value of total loans less capital and impairment £bn
the book value represents approximately Impaired loans £bn
84 percent of the total loan portfolio on a Total capital £bn
weighted average basis. Source: Capital IQ



Selected deals
The table below details several selected recent transactions in the UK debt portfolio market.
Table 6
Face value
Seller Buyer Asset type Completion date
(in local currency)
Barclays CreXus Investment Corp U.S. Commercial real estate £586m March 2011
RBS Blackstone UK Commercial real estate c.£1.6bn July 2011
Citi Barclays Egg’s Consumer PLs c.£2.3bn March 2011
Bradford and Bingley Discontinued Commercial PLs c.£435m Pending
MBNA Barclays Consumer PLs £130m April 2011
RBS Pending Commercial Infrastructure PLs c.£3bn In progress
LBG Arrow Global, Cabot Consumer NPLs £276m June 2011
Financial and Lowell
Irish Life and Permanent Pending Capital Home Loans c.£6.4bn In progress
(Residential BTL PLs)
LBG Pending Shipping PLs c.£6bn In progress
Confidential TPG Credit Residential Mortgage NPLs £50m March 2010
Bank of Ireland Pending UK RE loans £1.5bn In progress
Citi Yorkshire Building Society Savings and mortgage c.£3bn July 2011
business
Source: Press articles and market feedback

Buyers wealth funds. The appeal of these new increasingly moving up the learning
The buyer space has been much more buyers to vendor banks is obvious: deep curve and expanding their capabilities
interesting recently. Barclays acquisition pockets, lower return requirements in this space. But questions still remain
of Citi’s Egg portfolio in March 2011 and higher levels of experience in the as to whether many of these larger
marked the first strategic purchase of a credit investment space. And while pension and sovereign wealth funds
major portfolio transaction in many years this burgeoning group of buyers will will continue to function as passive
and was widely cheered by vendors and not be a replacement for strategic investors through private equity
pundits alike. bank purchasers, they do represent a and investment banking vehicles, or
credible and viable option for many of whether they will step forward
Outside of this notable transaction, the non-core performing assets that are to become outright purchasers of
however, the market has seen very little currently tapped for future sales. non-core banking assets (at suitable
strategic interest from UK banks and prices for vendors).
building societies in buying their peer’s While traditionally focused on RMBS
assets. Where strategic interest does and CMBS notes, the combination of
depressed activity in the securitization The UK consumer NPL sale market:
exist, it is largely confined to those very
market and the nature of many Standing at the crossroads
high quality consumer loans that are
complementary to the buyer’s existing longer dated and better quality loans The UK consumer NPL market is at a
customer profiles and are capable of have meant that these investors are crossroads. Down one path is a return
external financing. increasingly looking at the outright to the ‘old market’ of 2007/08 where
acquisition of certain loan portfolios. regular, small portfolio sales were the
With few strategic banking purchasers norm. But the other path may very
for non-core loan portfolios, the sector Although many of these investors have well lead to the birth of a ‘new market’
has seen the rise of longer term been very selective and somewhat dynamic in which large overseas
financial buyers such as pension funds, less proactive than traditional debt investors look to secure large portfolios.
insurance companies and sovereign purchasers in the past, they are



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