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News Release

London

Lack of new debt funding affects rate of balance deleveraging as eurocrisis continues to impact bank behaviour

According to Bank of England Q4 2011 bank lending statistics


The impact of the sovereign debt crisis in Europe continues to constrain new lending to real estate and the rate of bank deleveraging in the UK, according to Jones Lang LaSalle. Lending to real estate fell for a seventh quarter to £183 billion; an 18% decrease on levels seen a year ago as shown in the latest Bank of England quarterly lending figures. UK bank exposure to real estate* remained static at 9% from Q1 2011. 

“There continues to be restricted new lending to UK real estate as financial institutions focus on improving their capital adequacy positions and reducing their debt exposure,” said Barry Osilaja, Director in Jones Lang LaSalle’s pan-European Corporate Finance team. Barry continued; “There has been a gentle downward trend in the amount outstanding to real estate over the past twelve months but no real consistency of behaviour. Clearly in the current climate it is not easy to deleverage by selling assets, but banks are managing to push through some transactions, although these tend to be more opportunistic. This is further complicated by the fact that secondary assets make up the greatest proportion of properties on loan books, but are the most difficult to fund at the moment.”   
 
Jeremy Handley, Director in Jones Lang LaSalle’s Valuation Advisory team, added: “It is difficult to ascertain a clear pattern in bank deleveraging, but currently lenders are looking for bigger solutions to their exposure because workouts via smaller transactions become too time consuming due to the size of the workout portfolios. In this sense, we expect bank deleveraging to become more lumpy as bigger deals impact quarterly figures.”
 
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Notes to Editors
* The proportion of lending to real estate as % of total lending.