Over the next two years non-bank lenders are projected to more than bridge the gross debt funding gap. This will lead to a surplus in a number leading core European markets, such as the UK, France, Sweden and Germany. All other markets remain exposed, most notably Spain, Ireland and Italy. By not reallocating any surpluses, this leaves a USD50bn European net funding gap.
In our updated analysis, Europe’s net refinancing gap has come down by 42% compared to the USD86bn six months ago. The gross gap remains at USD163bn reflecting a 16% decline over the same period. Increased writedowns and redemptions in some markets have helped soften the regulatory impact.
The level of refinancing required going forward will decline from a peak in 2013. The refinancing gap is expected to remain elevated in the near term reflecting extension of loans originated at the peak of the market. Over the longer term we expect the impacts to shrink with growth in non-bank lending and as regulatory pressures force banks to work out their legacy loans.
Despite a temporary slowdown in fund raisings in 2013, we do still expect more growth in non-bank lending over the next three years. Their share of the market is projected to be higher at 15% in the UK relative to Europe as a whole (7%). Both remain well below the North American average of over 20%.
Surplus capacity in core markets will take time to be redirected to non-core markets or re-priced. We expect these adjustments to happen over the next 2-3 years. We see this as an important next phase in the European markets’ fundamental restructuring into a multi-channel funding model.
Source : DTZ (Groupe UGL)