Bargain basement in the Baltic states
Scandinavian banks are set to become huge owners of Baltic real estate. A large proportion of home loans in the region come from Nordic lenders and repossessions are rising. Some banks are already making preparations to take over and service large numbers of homes. How will they manage this risk?
Nordic banks are drawing on the lessons of Sweden’s property crisis in the early 1990s as an increasing proportion of their Baltic mortgage loans slide into trouble. With the local property markets comatose, selling repossessed homes would leave banks recovering a tiny fraction of their loans – one Riga-based banker indignantly says he was recently offered 5% of the original value to sell one portfolio to a local group of distressed investors. He turned the proposal down flat, but the
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