LONDON Dec 10 Bank of America Merrill Lynch
is emerging as one of the biggest buyers of loans from
deleveraging European banks, which have been selling loan
portfolios to raise capital and comply with stress tests, tidy
up their balance sheets and refocus on their client base.
The US bank has bought at least 7.3 billion euros ($9.44
billion) of loans since late 2011. It has held on to some of the
assets in a strategic move to deepen client relationships and
sold the remaining loans at a profit to end investors.
"Bank of America is by far one of the biggest buyers of debt
out there," a trader said.
The US bank has been on a buying spree to deploy more than
$100 billion of surplus capital that it has raised since Lehman
Brothers collapsed in September 2008 and has profited from
European banks' need to sell large portfolios quickly.
Portfolio sales are a direct result of the financial crisis
and have not been seen on this scale before. European banks have
had to change their approach to how quickly they divest assets
and realise losses to give better visibility and accountability
on their equity base to shareholders and regulators.
BofA Merrill has targeted performing and non-performing
bilateral loans, revolving credit facilities, trade finance,
structured trade finance facilities and Export Credit
Agency-backed loans from a wide range of sellers, including
French, UK, Spanish, German and Italian banks.
The bank has faced stiff competition from other interested
buyers, including Citigroup and Barclays and hedge funds and
other institutional investors, but has managed to buy several
portfolios through its ability to buy the loans quickly and in
bulk, rather than on a single name basis.
BofA Merrill bought a $1.2 billion portfolio of Latin
American loans from Royal Bank of Scotland in late 2011.
Purchases this year include a 300 million euro-equivalent
portfolio of loans from Allied Irish Bank in early
2012; a 4.2 billion euro-equivalent portfolio of loans from
French bank Societe Generale and a 2.5 billion euro
portfolio of loans from Banco Santander.
The bank is also considering buying a 2 billion euro
portfolio of loans from Ireland's state-backed Irish Bank
Resolution Corporation - the former Anglo Irish Bank - if the
portfolio goes for sale.
BofA Merrill has a team of 140 analysts to assess the credit
quality of each portfolio, which allows the bank to price and
execute large portfolio sales quickly in one or two weeks.
European banks have broken the stigma of refusing to sell
loans at a loss and are now managing portfolios more activity as
they retreat to core markets, redefine strategy and
relationships, manage country exposure or because they have been
forced to by regulators.
($1 = 0.7735 euros)
(Reporting by Tessa Walsh and Claire Ruckin; editing by