Project Baracoa: Cajamar Puts €800M Portfolio Up For Sale

21 January 2016 – Expansión

The banks have begun 2016 with the firm intention of accelerating the clean-up of their portfolios of problem assets. In this vain, Grupo Cooperativo Cajamar has put up for sale €800 million of loans granted to now bankrupt companies, and has whereby joined Banco Popular in the market, which announced yesterday that it wants to sell €8,000 million of real estate assets this year.

Cajamar’s operation is the one of the largest to go on the market in recent months and matches the scale of others launched by larger groups such as CaixaBank, Bankia and Sabadell.

With this operation, Cajamar is looking to reduce its default rate, which is one of the entity’s Achilles heels. The ratio amounted to 14.27% in September 2015, having decreased by two percentage points in twelve months.

The operation has been launched by N+1 under the name Project Baracoa. The portfolio contains 966 loans to companies that have now filed for bankruptcy. The loans are worth almost €800 million and 85% are secured by real estate collateral.

Cajamar has closed other operations of this type in recent years, such as the sale last year of a €640 million portfolio of unsecured written-off loans to Cerberus. That is one of the funds with which the cooperative group has done the most business, including the sale of its real estate management unit, Cimenta 2, for €225 million, plus €20 million depending on the performance of the business plan.

In addition, the US fund is one of several investors that has been sounded out regarding a possible investment in the share capital of Cajamar’s bank, Banco de Crédito Cooperativo (BCC), in the event of a potential capital increase prior to an eventual IPO. For the time being, Generali and TREA Capital have both become shareholders.

BCC is the only Spanish cooperative group to be supervised by the ECB. The entity brings together the business of 32 rural savings banks: 19 that form Grupo Cooperativo Cajamar – the vendor of the Baracoa loan portfolio – and another 13 entities, which are also shareholders of the bank, but through a cold merger. BCC had assets worth just over €40,000 million at the end of September 2015.

The entity saw its results drop in 2015, as it generated lower gains from its financial operations (ROF). As such, it earned €39 million during the 9 months to September, i.e. 46% less than during the same period in 2014.

However, the group still generates sufficient margins to continue increasing its revenues by reducing the price of its deposits, as a result of which it increased its interest margin in 2015. The lower provisions were good news for the group, as they decreased by 60%. Despite that, profitability (ROE) decreased to 1.9%.

One of the challenges still facing the group led by Cajamar is the need to clean-up its portfolio. The entity still holds almost €3,000 million of loans to property developers.

One of the areas on which the entity is trying to focus in order to increase its portfolio of profitable loans is consumer finance, with the signing of an alliance with Cetelem, owned by BNP Paribas. Cajamar has also teamed up with other companies, such as those specialising in insurance, namely Generali; and investment funds, such as TREA.

In terms of its integration, last week, the 19 entities led by Cajamar announced the homogenisation of their brand.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

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