Source: Bloomberg
Author: Katherine Doherty, Todd Gillespie
A rich customer of Bank of America takes out the art collection under the name in order to borrow enough money to buy a sports team.In order to renovate his manor, another customer sacrificed the treasured 19th -century American landscape painting.
This is the world's artistic loan world -the collection is used to pledge loans, so that the rich collectors can use it to monetize without giving up the precious collection.Art sales have slowed down, forcing many people to re -evaluate their choices.In May, the most important auction season in New York decreased by about 23%year -on -year, and the richest buyers in the world watched the sidelines.
Deloitte Global Art and Financial Coordination Commissioner Adriano Picinati Di Torcello said, "If you are a collector and now need liquidity, you will not sell it first, but use your artwork to make a mortgage loan and wait for the market to wait for the market"The environment has improved." He said that it is promoting the growth of the art loan market.
With the expansion of the market, several Wall Street Banks are stepping up the expansion team and selling this service to new and old customers.Although the exact scale of the market is still unknown, Deloitte's expected loan balance in 2024 may exceed 36 billion US dollars, which is increased from US $ 29 billion to US $ 34 billion last year.Deloitte said that the balance of such loans five years ago was US $ 20.3 billion to $ 23.6 billion.
The largest bank in the United States is seeking to expand its layout in the art market to attract and retain the richest individuals and families in the world.The needs of catering to the wealthy class often means that they must compete with their opponents, provide more diverse products, and always fight the threat to customers to transfer funds to other parts.
When a wider financial market faces fluctuations, art loans provide unique advantages for the wealthy collectors who have evaluated investment.Unlike stocks, artworks are not affected by daily fluctuations, but are valued at the year.
Katy Lingle, the US loan solution director of JP Morgan private banks, said: "We won't ask your collection of Andy Volhol every day."
Compared with the high valuation of records during the crown disease epidemic, the global art market has cooled down.Despite the sharp decline in sales and the decline in valuation, the demand for art loans still exists.
Drew Watson, director of the Bank of America Art Service, said the bank noticed that the new credit quota that arts as mortgaged increased by more than 14%year -on -year.The amount of art loan of the bookkeeper has recently reached the highest level of record.A spokesman for Morgan Chase said that in the bank's assets and wealth management business, art loans increased by 1%year -on -year, which was consistent with other loans in the business.
Watson said: "Even in the environment of rising interest rates, people are still seizing opportunities in time," to obtain loans through artworks instead of selling them at discounts.
A spokesman for Bank of America said that since the bank established the art service team in 2017, it has occupied more than 30%of the market share.The team has 12 experts in the field of credit, wealth planning and charity in the art market.At the same time, Bank of America is constantly investing in the team.Watson said that the bank's customers who have obtained a loan will retain these loans, and the loan utilization rate will remain at about 70%this year.
"The reservation rate and high utilization rate are also reflected through the remaining loan balance," he said.
These loans from Bank of America use floating interest rates, so over time, if the interest rate decreases, the cost of funds is expected to decrease.Watson said that the calculation of interest rates is based on the guarantee interest rate of overnight financing plus the spread.Therefore, with the central bank's interest rate cuts, such loans are more likely to increase.
FOTINI XYDAS, director of the financial director of Citi Private Banking, said that the bank has a stable art loan customer base because compared with other loans, the interest rate of art loan is still more favorable.Citi is expected to account for 10%to 15%in the market.
"Although the interest rate is high, compared with the volatility of other assets, artworks are a very stable asset in the long run," she said.
Art loan has the function of credit limit, so customers can use it to extract loans and repay it when they are capable.Given the nature of mortgages, art loans are only applicable to the rich.The larger the collection, the stronger the borrower enjoys the more flexibility.
To get a loan of $ 5 million or more at the Bank of America and Citi Group, the value of the collection usually needs to reach at least 10 million US dollars.The amount of loan provided by Bank of the United States is 50%of the value of the collection, and each collection value is at least about 100,000 US dollars.The loan period is about one to three years and can be renewed.As long as it is in the United States, customers can still keep their collection at home for protection.Citi Group requires the minimum price of each collection to $ 200,000.
The loan scale provided by JPMorgan Chase depends on the value of the collection and the strength of the borrower.Lingle claims that the bank pays attention to the diversity of collections to ensure that they have "museum quality".The bank also conducted a financial analysis of the borrower to ensure its ability to repay debt.
Celebrates who have collected several Picasso and Monet works use them to obtain a credit to pay taxes related to the inheritance planning.This is another common purpose of the product.
Another person in charge of a private equity fund hopes to get a credit to provide funds for capital urging.The Bank of America issued a loan of 10 million US dollars to a borrower worried about market fluctuations and used his post -war and contemporary art as mortgage.
PHILIP HOFFMAN, the founder of the Fine Art Group, the founder of the Fine Art Group, which has a competitive relationship with banks, said, "Additional bonds, death, divorce and bankruptcy are used in use, so we face endless loan needs."
