The art market has slowed in recent years – with the cumulative profits of the auction world’s most expensive pieces declining by hundreds of millions of dollars – but that hasn’t stopped the 1% from leveraging their art collections for business gain.
The world’s largest banks are increasingly seeing their clients use expensive art as collateral, with the total value of loans taken out against art pieces soaring from $20 billion in 2019 to an estimated $36 billion by the end of this year, according to Bloomberg News.
“If you’re an owner and need liquidity now, you pause on selling and instead borrow against your art, waiting for better market conditions,” Adriano Picinati di Torcello, global art and finance coordinator for Deloitte, told the outlet.
Bank of America and Citigroup both have teams specifically devoted to clients with high-value art collections, with the former seeing lines of credit taken out against art increasing by nearly 15% in the last year. At the same time, art sales have slowed: in 2022 the combined value of the top-ten art pieces sold at the bellwether May auctions was $760 million. Last year it was $403 million. This year the total was $312 million, according to Bloomberg.
Despite this cooling market, financial experts emphasize that art loans remain particularly effective, as the value of an art piece is less volatile than other forms of collateral.
“Even though rates are higher, art is a very stable asset over the long term compared to other assets in terms of volatility,” Fotini Xydas, head of art finance at Citi Private Bank, told Bloomberg.
“We’re not asking what the value of your Andy Warhol is every day,” Katy Lingle, U.S. head of lending solutions at JPMorgan Chase & Co. Private Bank, told the outlet.
Check out the 10 most expensive works of art sold at auction in 2023.
