UK Debt Sales Could Rise to $17.6 Billion This Year

The London Times reported yesterday that British banks could sell $17.6 billion of bad consumer debt to debt collectors this year, compared with $14.5 billion last year, representing an increase of more than 21 percent.

TDX Group, a British-based bad debt broker for banks, found that the market for bad debt there has grown from $3.9 billion in 2004. Mark Onyett, the CEO of TDX, tells the Times that he expects the market to grow by a further 25 per cent this year as banks continue to feel a squeeze on capital.

The  first quarter has already been busy for debt collectors with $2.5 billion of debt up for sale, according to Ken Maynard, CEO of Cabot Financial. “It was the busiest first quarter we've ever seen,” he said. Maynard told the paper that British banks are planning to sell more of their impaired loans in the next six months.

The debt portfolios range in size from about $1 million to $5 million. Cabot Financial and other debt collectors pay from 3 per cent to 20 per cent of the face value of the debt.

Meanwhile, investment banks are considering investing in the consumer debt market, according to TDX's research, either through direct acquisitions of debt portfolios, or by backing debt collectors. The Times reports that Deutsche Bank, Lehman Brothers and Goldman Sachs have invested in the unsecured consumer loan market in the past.