x Abu Dhabi, UAEThursday 27 July 2017

'Vulture' fund chief still circling Spain

Wilbur Ross, the billionaire investor who specialises in turning around failing companies, says European assets have not yet hit rock bottom.

Wilbur Ross, the chairman and chief executive of WL Ross & Co, said Europe had become
Wilbur Ross, the chairman and chief executive of WL Ross & Co, said Europe had become "attractive" again but that the time to invest in the Spanish banking sector would not be right for at least another year. Mark Lennihan / AP Photo

Wilbur Ross, the billionaire investor who heads one of the biggest vulture funds in the United States, says it is too soon to call a bottom to asset prices in Spain and other recession-hit European nations.

Mr Ross, the 74-year-old chairman and chief executive of WL Ross & Co, who is on a tour of the UAE talking to potential investors, said Europe had become "attractive" again but that the time to invest in the Spanish banking sector would not be right for at least another year.

"Perhaps some time over the next 12 to 18 months we might be making investments. We actually think it's a little too early right now. Those countries, in addition to sovereign debt problems and deficit budgets, also have structural problems in their economies and in their society."

He declined to name any targets for investments.

Spain's economy has suffered after austerity measures were imposed to quell market fears of a Greek-style debt crisis, which have also sparked social unrest and calls for a vote on independence from Catalan nationalists, who hold sway in Barcelona.

A prolonged property bust also forced consolidation and recapitalisation drives on the country's network of regional savings banks, which has pushed Madrid ever closer to requesting a bailout from the European Union's stronger members.

Mr Ross is no stranger to investing in banks, having taken a number of stakes in financial firms laid low during the early months of the global financial crisis, now in its sixth year.

The company's holdings include a 9.7 per cent stake in Bank of Ireland, which allowed the lender to avoid nationalisation. The company also participated in Richard Branson's acquisition of the British mortgage lender Northern Rock.

Mr Ross said he saw the Arabian Gulf as a "source of capital" for investments, rather than a region where he would seek to buy into a troubled company.

"Historically, there has been a lot of investment out of the Gulf in financial institutions elsewhere," he said.

"I wouldn't be surprised if that would continue. The opportunity is to buy banks that have failed and have been cleaned up by their governments and are now available at attractive prices."

Improved sentiment towards the euro zone's banking sector has underpinned a substantial rally in markets since the summer, which has seen the Stoxx 600 index of European equities rising 14.9 per cent since June.

"The European Central Bank is truly acting as a lender of last resort and it has put a floor under the problems that might arise, and gives us - and I should think a few other investors - a fair amount of comfort," Mr Ross added.

The prospect of a pan-European banking union and the promise of blanket deposit guarantees would be very attractive to investors in financial services, he said.

The euro zone's financial markets were in retreat again yesterday, with the Stoxx 600 falling as much as 1.4 per cent to 268.95.

Market investors were feeling wary after the recent sustained rise in European stocks as corporate earnings season begins, but long-term prospects for the currency bloc were improving, said Henk Potts, an equity strategist at Barclays Wealth.

"Results have been rather disappointing, and that's taken the shine off of the equity market rally," he said. "But given the fact that there's still some massive risks and uncertainty in the euro zone … it's a surprise that markets have been consolidating. Long-term fundamentals still look supportive for equity markets."

ghunter@thenational.ae