Some European countries are struggling to try all methods to boost their weakening economies. However, this recession scenarios do not seem to scare away investors. In fact, some investors think that this might be the right time to invest in the continent.
PricewaterhouseCoopers has recently revealed that investors raised about €60 billion ($76.5 billion) to purchase so-called noncore loans shares being currently in the possession of European banks.
The execution of some new regulatory requirements in banking business stirred the interest of investors to venture in Europe. These regulations will soon push European financial institutions to reduce risky lending, especially in construction industries and real estates that were hit hard during the financial maelstrom.
European prospective investors come mostly from major hedge funds and private equity firms. In addition, Richard Thompson of PricewaterhouseCoopers said that having pension funds and cash-rich sovereign wealth fund, investors are also coming to the continent in hopes of hauling positive profitability and investments with long-term returns. He shared that 15 percent of the 60 billion euros came from these financial minorities. Thompson expressed his awe of the big interest the investors are having in European banks’ assets.
Many banks rely on low-cost, short-term loans from the European Central Bank to negate its losses. As the result, there are only a handful of deals that were closed and completed up to the present. E.C.B.’s financial support prompted banks to evade the large discounts the investors have demanded to assume control of the loan portfolios. On the sunny side, experts say that the number of deals will increase in the coming years as banks refinance their loans from the European Central Bank. Even with the prospect on many new investors seeking for monetary assets in Europe, banks are afraid that there are still few prospective buyers for the loan portfolios that they need to be rid off. According to PricewaterhouseCoopers’ statistics, financial firms have €2.5 trillion of noncore loans posted in their balance sheets – that is about 6 percent of the total banking assets in the continent.
