2 November 2016 – Expansión
The property sector in Spain is recovering. Most of the indicators are showing increases in house sales, greater activity, rising prices and even shortages in the supply of properties in certain areas. Nevertheless, this improvement is not been reflected in the income statements of the banks so far; they are still trying to digest the excesses of the bubble, which they are struggling to shake from their balance sheets.
Spain’s banks recorded losses of more than €2,072 million in their respective real estate businesses during the first nine months of the year. Banco Popular led the loss ranking: the entity chaired by Ángel Ron recognised a cumulative loss of €723 million between January and September.
Beyond these huge losses, the problem for Popular stems from the fact that a small part of its business, which accounts for just 18% of its asset volume, has managed to erode almost all of the profits generated by the remaining 82% of its assets (which the entity considers to be its “core” business and which generated profits of €817 million between January and September 2016).
Behind Popular, the bank with the second largest losses in its real estate business was CaixaBank. The Catalan entity recorded losses of €517 million between January and September. It was followed by BBVA and Banco Sabadell, with losses (in their real estate businesses) of €315 million and €300 million, respectively.
Meanwhile, Bankia and Bankinter have chosen not to disclose profit and loss data about their real estate divisions.
Improvements in the market
Despite the continued losses, these aggregate figures do actually reflect the improvement in the real estate market in Spain, since they show a significant reduction with respect to the losses recorded just one year ago, according to data provided by the financial institutions themselves. CaixaBank is the entity that has managed to reduce its losses the most: the bank chaired by Jordi Gual recorded losses of €1,014 million during the third quarter of 2015, which means that the losses from its real estate business fell by 49.1% YoY in 2016.
BBVA was the second ranked entity in terms of loss reductions, although the decrease was less significant in this case. The bank chaired by Francisco González succeeded in decreasing the losses from its property activity by 24.4% in September 2016 with respect to the third quarter of 2015. The third ranked entity in terms of the reduction in losses was Banco Santander, which cut the losses from its real estate business by 22.5%, according to its own data. (…).
Profits in 2017?
“We never expected to see a full recovery this year, but it is true that the improvements are happening more quickly (than we’d expected)….sales are accelerating and the losses will no longer be as significant in the not too distant future”, according to José Antonio Álvarez, CEO at Banco Santander. (…). And with just two months to go before the end of the year, Álvarez and the heads of Spain’s other major banks are now cautious about the timing of the full recovery, prefering not to comment on whether or not 2017 will be the year when the sector finally generates profits, albeit minimal.
Original story: Expansión (by Nicolás M. Sarriés)
Translation: Carmel Drake