Opening Market Overview

Bank Asset Disposals May Not Pick Up Until 2011 - Report
LONDON (Dow Jones)

Many bank and financial institution holdings acquired by European governments during the credit crisis may not come onto the market until 2011, a report from PriceWaterhouseCoopers says.

British banks in particular are set to attract interest from overseas investors when they are sold, says the report, published Tuesday.

But factors including market volatility, questions over the continuing risk of impairment charges and the political landscape mean most large scale asset disposals likely won't take place this year, the report concludes. In particular, British bank asset disposals are unlikely to take place until after the next U.K. General Election, widely expected in the first half of this year. Many U.K. political commentators expect the opposition Conservative Party to take power.

Banking assets that are expected to attract attention include a number of assets owned by Royal Bank of Scotland Group PLC (RBS). The bank, which received about GBP46 billion in capital injections from the government, will be required by European Union rules to divest assets, including about 300 bank branches and a global merchant services payment unit. Lloyds Banking Group PLC (LYG) is also expected to divest at least 600 branches and some insurance assets.

The U.K. government is also expected to divest the so-called "good bank" portion of Northern Rock, the bank and mortgage lender which was taken over after its collapse in 2007.

But although private sector deal activity in the banking sector is increasing, with deal activity expected to pick up during 2010, the bulk of these asset disposals may take some time, PWC says.

"The lion's share of deal activity will sit with the private sector during 2010," Shaun McNamee, a partner at PWC, said.

"Many European governments have switched their focus from the targeted support of certain financial institutions to planning their exits from bank share holdings... however, we believe it unlikely that large scale exits by European governments will materialize during 2010."

Although bank sales may take some time to get underway, the report's authors believe the U.K. banking industry will be attractive to foreign bidders in the coming years, citing PWC forecasts for U.K. GDP growth to accelerate faster than that of France or Germany.

Closed my BARC long for +32
Patience is certainly a virtue!
I'll get back in once it falls back to its support levels, if it does of course. Quite happy with my profit and with risk off the table.

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