Europe's Banks Set To Sell 100 Billion Euros Of Unwanted Loans

(Reuters) - Europe's banks are likely to sell a record 100 billion euros (73 billion pounds) of loans this year that are no longer part of their main businesses, according to consultants PwC, chipping away at a pile of 1.9 trillion euros of unwanted assets.

European banks last year sold 91 billion euros of so-called 'non-core' loans, and that number is likely to rise by another 10 percent this year, PwC said in a report released on Tuesday.

The consultancy predicted it would take at least another five years for Europe's banks to get rid of their problem assets, meaning the clean-up will have taken more than a decade since the 2007/09 financial crisis.

The 1.9 trillion euros of unwanted loans equates to about 4 percent of the industry's assets. Around half are non-performing loans and the other half are performing loans that banks do not consider part of their core businesses after changing strategy.

Banks are shrinking balance sheets that were bloated before the financial crisis. Most of the deleveraging comes from loans running off, but banks are also selling loan portfolios to speed up the process.

Bad loans are a particular problem in Italy, where banks hold about 186 billion euros of non-performing loans. Italy is considering a state-backed company to help banks offload the loans so they start lending again, but has had to put the plan on hold, sources told Reuters last week.

Italian banks sold 8 billion euros of loan portfolios last year, and that should rise to more than 15 billion euros this year, PwC estimated.

Most of last year's loan sales were from banks in Britain, Ireland, Spain and Germany.

Assets sold include corporate loans, credit card portfolios and other unsecured retail loans, commercial property loans and other specialized loan books.

PwC said private equity firms and other investors had more than 70 billion euros to spend on assets being sold by European banks and there was "significant competition" for assets, which had raised prices and made it more attractive for banks to sell.