Despite the slowdown the NPL markets in the US and Europe is giving ample investment opportunities. Between the US and Europe latter is becoming the favorite for the investors. The transactions in the NPL markets have increased through 2012 and the banks are keen to sell their NPLs.
According to the January 2013 reports, US bank deposit rates fell down mainly due to the US senate’s failure to extend the TAG program which was a component of the Temporary Liquidity Guarantee Program of FDIC which was originally adopted in October 2008. Through this program lending became easier due to the reduction in cost of funding and lending became more viable and helped people to mend their businesses. The main components of the TAG were1) Debt Guarantee Program which temporarily guarantees all newly-issued senior unsecured debt up to prescribed limits issued by participating entities. 2) The Transaction Account Guarantee program gives a
Temporary full guarantee by the FDIC for funds held at FDIC-insured depository institutions in non-interest-bearing transaction accounts above the existing deposit insurance limit.
By December 2012 NPL s held by lenders were US$164bn in the distressed loans. In order to keep the value of the shareholders more than 7000 US banks are getting ready for the merger and acquisition. Consolidations also play a vital role in increasing the number of investors into the NPL market.
The sales of non performing CRE (commercial real estate) loans in the US fell down to US$15 billion in 2012 from US$26 billion in 2011. The sales of non performing
CMBS (Commercial mortgage-backed securities Commercial mortgage-backed securities) loans will be active from 2013 onwards.The decline in the unemployment rate and the stable growth will boost the demand for space in commercial properties.
Europe’s non performing loan market worth $10 trillion is showing vital signs of growth than the US. Investors are finding Europe the right place to invest. In order to be stable the European Banks have to refinance or sell NPLs worth €700 billion. Till January 2013 banks have sold NPLs around 20% to 25%
The Ernst and Young report on the NPL predicts that the German banks which made 3% NPLs last year will make only 2.8% NPL. And the rest of the Eurozone will get a rise in NPL sales to 7% Towards the end of 2012 German banks had NPL worth €200 born and due to the increased NPL sales the NPL in 2013 is expected to decline to €183 bn. Spain owns €190 being distressed loans, but not attracting too many investors. The other two countries investors target is the UK and Ireland.
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