A wealthy client at Bank of America Corp. put up his fine-art collection so he could borrow enough to buy a sports franchise. Another posted his cache of 19th century American landscapes to renovate his estate.
Such is the burgeoning world of art lending — where pieces are used to secure loans, allowing their affluent owners to tap their collections for cash without having to part with prized possessions. Art sales have slowed, forcing many to reevaluate their options.
The major May New York auction season fell about 23% by value from the prior year, with the world's richest waiting on the sidelines to buy.
"If you're an owner and need liquidity now, you pause on selling, and instead borrow against your art, waiting for better market conditions," said Adriano Picinati di Torcello, global art and finance coordinator for Deloitte.
That's contributing to the growth of the art-lending market, he said.
As the market expands, Wall Street's biggest firms are growing their efforts by adding staff and marketing the service to new and existing clients.
While the precise size of the market isn't certain, Deloitte estimates outstanding loans against art could surpass $36 billion in 2024, up from $29 billion to $34 billion last year. That also compares with $20.3 billion to $23.6 billion of such loans outstanding five years ago, according to Deloitte.
The largest U.S. banks are looking to broaden their reach into the art market as a way to bring on and retain some of the world's wealthiest individuals and families. Catering to the affluent often means competing with rivals to offer more diverse products, fighting the constant threat that clients can move their money elsewhere.
Art lending offers specific advantages for wealthy owners evaluating their investments as broader financial markets face volatility. Unlike stocks, art isn't subject to daily swings and is valued annually.
"We're not asking what the value of your Andy Warhol is every day," said Katy Lingle, US head of lending solutions at JPMorgan Chase & Co. Private Bank.
The global art market has cooled from record-high valuations coming out of the pandemic. Even as sales have slumped and values have pulled back, demand for art loans is there.
Growth in Art Loans
Bank of America has seen new credit lines backed by art rise more than 14% compared to a year ago, according to Drew Watson, head of art services. Its book of art loans recently hit its highest on record.
Within JPMorgan's asset and wealth management business, art lending is up 1% year-over-year, in-line with other loans in that business, according to a spokesperson.
"Even in a higher rate environment, people are still taking advantage of timely opportunities," taking out loans on their art over selling it at a discount, or selling stock, Watson said.
