Banks In Europe Face 120 Billion Euro Loss On Consumer Loans

Mon, 21 Jul 2008

Europe's banks are set to lose 120bn euros on consumer loans and mortgages over the next three years, with Britain, Spain and Ireland suffering the most, according to new research.

A report by management consultancy Oliver Wyman and credit management services group Intrum Justitia, has revealed that losses for banks in Europe on consumer credit and mortgages will reach 34.7bn euros this year and 42.5bn in 2009, up 35 per cent on 2007.

"Banks are already suffering from higher funding costs and a lack of liquidity, but with sharply falling house prices in some markets and a generally deteriorating macro-economic environment coupled with rising inflation, we expect the total retail credit losses across Europe to rapidly increase," said Matthew Sebag-Montefiore, partner at Oliver Wyman.

The report claimed that Britain, Spain and Ireland will be hit the hardest due to a combination of aggressive lending by the banks and the risk of the macroeconomic environment significantly changing for the worse.

Losses on UK consumer credit and mortgage lending could surpass 21bn euros in 2009, more than 6bn euros above the mark for 2007.

The research also revealed that mortgage write-offs in Britain are forecast to jump from just 700 million last year to 3.5bn euros in 2008 and 4.7bn in 2009, while consumer credit and mortgage losses in Spain is estimated to be 2.1bn euros higher next year than in 2007.
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