Bank of America linked to purchase of €2bn IBRC loan portfolio

Bank of America Merrill Lynch is being linked to the buying of a €2bn portfolio of loans from Irish Bank Resolution Corporation — the former Anglo Irish Bank.

The US bank has bought at least €7.3bn of loans since late 2011. It has held on to some of the assets in a strategic move to deepen client relationships and sold the remaining loans at a profit to end investors.

The bank has been on a buying spree to deploy over $100bn (€77.3bn) of surplus capital that it has raised since Lehman Brothers collapsed in Sept 2008 and has profited from European banks’ need to sell large portfolios quickly.

Portfolio sales are a direct result of the financial crisis and have not been seen on this scale before. European banks have had to change their approach to how quickly they divest assets and realise losses to give better visibility and accountability on their equity base to shareholders and regulators.

Bank of America Merrill Lynch has targeted performing and non-performing bi-lateral loans, revolving credit facilities, trade finance, structured trade finance facilities and Export Credit Agency-backed loans from a wide range of sellers, including French, UK, Spanish, German and Italian banks.

The bank has faced stiff competition from other interested buyers, including Citigroup and Barclays and hedge funds and other institutional investors, but has managed to buy several portfolios through its ability to buy the loans quickly and in bulk.

It bought a $1.2bn portfolio of Latin American loans from Royal Bank of Scotland in late 2011. Purchases this year also include a €300m portfolio of loans from Allied Irish Bank in early 2012; and a €4.2bn portfolio of loans from French bank Société Générale.

The US bank has a team of 140 analysts to assess the credit quality of each portfolio, which allows it to price and execute large portfolio sales quickly.

European banks have broken the stigma of refusing to sell loans at a loss and are now managing portfolios more activity as they retreat to core markets, redefine strategy and relationships, manage country exposure or because they have been forced to by regulators.