Banks Growing Aggressive on Loan Sales

SAN DIEGO-Banks are growing more assertive in managing, resolving and selling troubled loans and other real estate they have taken back and held in their own portfolio, according to an industry expert. Michael Cain, managing director of asset sales and advisory for San Diego-based Douglas Wilson Cos., says that some banks “are beginning to aggressively move assets in combination with raising capital to improve their capital ratios and position themselves to start lending again.”

Cain’s team at Douglas Wilson Cos. has been hired for asset management and ultimate disposition of several substantial portfolio projects for a number of regional and national banks. He notes that one of the banks that Wilson is working with recently hired the firm to place a small loan balance pool out in the market. “We spent extra time making sure the valuation was accurate, and marketed the pool to a smaller but targeted audience,” Cain says. Because of that, he says, the bank has received multiple offers “at a price they were more than satisfied with within a week on the market.”

According to Cain, who witnessed the last real estate downturn, “There’s plenty of equity out there but not everyone is convinced we have seen the bottom.” Buyers need to know that the valuation they’re seeing offered is accurate, and backed by an experienced third party, he says.

Cain, who has 25 years of experience with real estate lenders, financial institutions and real estate companies, says that banks will find it difficult to sell these assets as one-offs: “These loans need to be realistically underwritten, bundled, pooled and sold in order for banks to grow and lending to be fully revived,” he says.

In order to get the most value from these banks’ loan portfolios, Cain’s team at Douglas Wilson reviews the pool in detail, recommends how to group assets together for the best execution, and creates an implementation plan for handling that loan book. Cain advises that banks need to begin developing strategic plans with a focused approach to lending profitably. “Otherwise, equity investors have no interest in investing into a deteriorating loan portfolio without a plan to generate future earnings for shareholders,” he says.