Europe’s refinancing gap for 2014-15 is down 33% year on year to EUR51bn supported by bank write downs, improved capital values and more aggressive refinancing LTVs. This is in line with our expectations.
However, an increase in the negative regulatory impact on property lending was unexpected and more than offset the decline in refinancing gap. This adds an additional EUR73bn burden taking the gross debt funding gap to EUR124bn, 2% higher y-o-y.
In line with recent years, there has also been a further 4% growth in alternative lending capacity to EUR145bn for the 2014-15 period. This growth has been driven by the re-emergence of investment banks as more active lenders.
As a result of these changes, Europe’s net debt funding gap has declined by 8% to EUR36bn compared to a year ago (Figure 1). Despite the fact we still have many countries with net gaps, like Spain. There are some key markets where there is surplus capacity, as alternative lending capacity exceeds the gross gap. In the UK, France and Germany this totals EUR45bn.
Previously, we assumed that this surplus capacity would not be used. But, now we do expect that the surplus EUR45bn lending capacity in core markets will be re-directed to plug remaining gaps in other countries. This seems more and more likely with insurers and investment banks having mandates across Europe. It is further stimulated by pricing becoming less attractive for lenders in some of the core markets, triggering more interest in other markets. In the end, the EUR45bn surplus is sufficient to plug the EUR 36bn remaining gaps.
Source : DTZ (Groupe UGL)