The suspension of new business at Eurohypo has crystalised fears that the eurozone crisis will further restrict the UK property lending market.
On Friday, lender Eurohypo’s parent company, Commerzbank, announced an immediate halt to all new business not related to its home market in Germany or Poland as part of its effort to meet stricter capital requirements imposed on European banks.
Although no time limit has been put on the temporary suspension, it is understood that it will be re-assessed in June next year when the European Banking Authority conducts its next round of “stress tests” on European banks.
Though Eurohypo cannot take on new clients, the suspension does not prevent it from offering existing clients loan extensions and new facilities.
There will be no changes or reduction in headcount at the UK division, which is led by Max Sinclair.
The move by the prolific property lender – and one of the few banks in the market willing to underwrite deals – is a blow to the UK real estate market and raises fears that further banks will follow suit.
Andrew Goodbody, president of the Association of Property Bankers, said: “At a time when banks are trying to raise additional capital or shrink balance sheets to meet the Basel III requirements, to have to write off a significant portion of Greek sovereign risk means you need more capital.
“The result is that banks will have less capacity to lend – either officially or unofficially – and it will also push prices up.”
Last month Savills dropped Société Générale from its 19-strong list of big-ticket lenders, which it defines as lenders both actively seeking and having achieved a total new lending over the previous six months of at least £75m in loans of more than £20m.
Eurohypo had a €5bn origination target for Europe in 2011 – of which around €2bn was earmarked for the UK market.
Commerzbank has already committed to selling Eurohypo by 2014. It has been speculated that the real estate and public finance divisions of Eurohypo might be split, in order to facilitate any potential sale.
Bridget.O’Connell@estatesgazette.com
