NEW YORK, June 16 (Reuters) - The expected unloading of roughly $1 trillion in assets by European banks represents a “significant investment opportunity” in residential and commercial real estate as well as corporate securities, Dan Ivascyn, one of Pimco’s deputy chief investment officers, said on Monday.
Pacific Investment Management Co, which oversees $1.94 trillion in assets under management as of March 31, said European banks entered the financial crisis with materially more leverage than U.S. banks, and economic growth in Europe has lagged the United States.
“Consequently, European banks have a lot further to go in deleveraging their balance sheets,” said Ivascyn, who manages the $35.7 billion Pimco Income Fund. “Over the next few years we expect to see European banks continue their strategy of asset dispositions and capital raises to deleverage their balance sheets.”
Ivascyn, who is head of Pimco’s mortgage credit portfolio management team and a lead portfolio manager for Pimco’s credit hedge fund and mortgage opportunistic strategies, said in a Q&A report on the company’s website: ”The prolonged and significant dislocation in some legacy structured products will continue to result in investment opportunities.
“Compared with the pre-crisis environment, the number of assets getting securitized and then rated by ratings agencies has fallen sharply, which has led to significant opportunities for investors that are not constrained by ratings,” he said.
As for economic growth, Pimco said the regulatory environment will remain significantly more restrictive than what the bond giant would have observed in the past. That, consequently, “will impede the loosening of credit standards in both mortgages and other forms of consumer credit,” Ivascyn said. “Given this backdrop, we have not seen, nor do we expect to see, a material loosening in credit standards, which was typical in prior economic recoveries. As long as credit growth remains muted, this will be a headwind for economic growth.” (Editing by Matthew Lewis)