NEW YORK - As Europe struggles with its debt crisis, US businesses and financial firms are swooping in amid the distress, making loans and snapping up assets owned by banks there - from the mortgage on a luxury hotel in Miami Beach to the tallest office building in Dublin.
The sales are being spurred on because European banks are scrambling to raise capital and shrink their balance sheets - often under orders from regulators. Huw van Steenis, an analyst with Morgan Stanley, estimates that European financial institutions will unload up to $3 trillion in assets over the next 18 months.
This month a team of three bankers from the London office of the buyout giant Kohlberg Kravis Roberts headed to Greece to examine a promising private company that cannot get Greek banks to provide credit for future growth.
Earlier this year, Google bought the Montevetro building in Dublin - the city of its European headquarters - from Ireland’s National Asset Management Agency, which acquired it after a huge bank rescue by the government.
“There is clearly a restructuring and shrinking of European financial institutions, and many of the assets they’re shedding are in the United States,’’ said Timothy J. Sloan, chief financial officer of Wells Fargo, which acquired $3.3 billion in real estate loans. “We’re keeping our eyes and ears open for the right situations.’’
Despite problems of their own, US financial firms see opportunities in a troubled Europe. And with companies in hard-hit countries on the periphery of the continent increasingly unable to borrow money from local banks, some US firms have been stepping into the vacuum. In the last quarter, JPMorgan Chase actually increased its total loans to European borrowers.
But in many cases, the assets are much closer to home.
Last month, Wells Fargo bought the $3.3 billion in real estate loans, which are backed by commercial properties in the United States, that had been owned by the former Anglo Irish Bank. Wells Fargo has also bought $2.4 billion in loans and other assets from the private Bank of Ireland, which is trying to raise $13 billion after a bailout by the European Union and the International Monetary Fund.
On Dec. 19, the Blackstone Group agreed to buy $300 million in real estate loans from Commerzbank that are backed by properties, including the Mondrian South Beach hotel in Florida and four Sofitel hotels in Chicago, Miami, Minneapolis, and San Francisco. Commerzbank, a German financial giant, is under pressure from regulators to raise $6.9 billion in new capital by mid-2012.
And despite opposition from consumer advocates, Capital One Financial could soon win final approval from the Federal Reserve for its $9 billion acquisition of ING Direct in the United States, one of the year’s biggest banking deals. Based in the Netherlands, ING has been forced by European authorities to divest ING Direct, an online bank, after ING required a $14 billion bailout.
Experts expect these kinds of sales to jump as European banks race to meet the June deadline imposed by the European Banking Authority to raise more than 114 billion euros in capital. Financial institutions also have to increase their Tier 1 capital ratio - the strictest yardstick of a bank’s ability to absorb financial blows - to 9 percent of assets.
Banks get a two-fold benefit from unloading assets like real estate loans and other holdings; not only do they have more cash, but there are fewer assets they must hold capital against in case of losses, thereby bolstering Tier 1 levels.