The Euribor closes a month below 0,5% for the first time in history.

(…) The reduction of the rates alleviated the tensions within the market and unleashed another wave of historic levels. The inter-bank market relaxed and the euribor at 12 months decreased, reaching 0,493%, below the previous 0,51%.

(…) this is the third consecutive month with descents of the Euribor, whose rate, 0,484%, is 0,782 points lower than in May 2012. (…)

Source: Expansión

More expensive mortgages and less profitable deposits: this is what you can expect when entering a bank.

These are not easy times for banks and even less, for their customers. To get a loan is not only complicated, but also more and more expensive, while the remuneration of savings does not cease to decrease. This has been confirmed by the figure sent by banks to the Bank of Spain on commissions and interest rates applied usually on operations with individuals.

These figures are the best approximation to what banks are charging and how much they are paying for their most usual products. However, it does not allow any comparisons between institutions as each one of them sends the figures they wish: for mortgages, for example, there are banks that provide the figure of the usual mortgage, while others refer to mortgages in order to sell their own properties, which are sensibly cheaper.

Anyhow, in most cases, the evolution of these figures from the last quarter of 2012 and the first one this year show a clear tendency: mortgages are getting more expensive and deposits are less profitable. According to the calculations made by with the figures from the main banks, the equivalent annual fee required for mortgages has increased in more than one tenth in only three months.

In total, out of the 21 institutions examined, eleven have increased the price of their mortgages, three have maintained it and seven have reduced it. The only two savings banks that continue operating in Spain, Caixa Ontinyent and Caixa Pollença, are in this last group. The highest increases have taken place in Bankia and Ibercaja.

The information is more convincing when it comes to deposits. At the beginning of the quarter, the Bank of Spain recommended all institutions to lower the offered profit in order to obtain savings from customers and thus end the liability war that was destroying the badly damaged banking margins. Results can already be seen.

The equivalent annual fee, in average, offered for deposits between three months and one year has decreased in one percentage point, down to 1,62%, while the one for deposits between one and three years has decreased by seven tenths, down to 2,65%. From the 21 examined institutions, fifteen lowered the remuneration on deposits for one year, one maintained it and four increased it. For longer periods, only two institutions-CaixaBank and Bankia-improved the offer to customers.

Experts and even bankers admit that this tendency will continue in the next few quarters, due to the situation within banks. The environment of low interest rates –the official price for money in the Euro zone is in a historic minimum of 0,5%-affects the profit of the institutions, especially those who have most of their balance sheet compromised in mortgages. The credit activity is also stagnated and no one bets on its recovery in the short term.

In this situation, it is normal that banks increase the margins applied on mortgages, so that the new production can compensate the low profitability of the existing portfolio. The only way to find a mortgage nowadays with a differential near 1% is buying the property from the bank. For the rest, it is difficult to imagine a margin below 3%, although there are important variations depending on the risk profile of the customer and the operation.

From the liability side, the wholesale financing is still expensive, although the situation has improved opposite to last year´s.

The recommendation from the Bank of Spain has been received as a blessing for banks: if credits are less profitable, the only way to protect the customer´s spread is to pay less for its savings. In fact, most institutions have showed an improvement in the price of their liability. All declared that they hoped for the descent of costs of deposits to spread in the near future.

Source: Expansión

Sareb celebrates today its first shareholders´ meeting.

Sareb celebrates today its shareholders´ meeting, the first one in its short history, as the bad bank started operating last December.

The main shareholder is the Banking Restructuring Fund, which controls 45% of the capital. It is the only public partner, as the remaining 55% is in the hands of 14 national banks (nearly all healthy banks except BBVA that refused to participate), two foreign banks (Deutsche Bank and Barclays Bank); ten insurance companies and the electric company Iberdrola.

All of them will meet tomorrow in the afternoon, in order to approve, among other things the accounts of 2012. In its first month of activity, Sareb lost 5,5 million Euros. In that period, the bad bank only had expenses related to its operational activity and the transfer of assets from the nationalized institutions from Group 1.

The shareholders will also vote the report regarding the remunerations of the institution. The Board of Administrators, made of fifteen members, earned in December 142.917 Euros, 33.000 of which corresponded to the salary of the president, Belén Romana. The general director, Walter de Luna, earned 32.083 Euros.

The annual remunerations of the upper echelon of Sareb cannot exceed 500.000 Euros annually, that is, the limit established by the Government for executives in banks that have received public aid.

Another matter that needs approval is the authorization on the Board to issue up to 20.000 million Euros in debt, with the corresponding instruments of fixed income. Sareb also needs to approve some changes in its statutes. The most important one is to obtain the authorization for those members of the board that wish to carry out complement activities to those in Sareb, so that the Sunday members of the board do not face incompatibilities. (…)

Source: Expansión

“We have met with Sareb and we are studying the purchase of assets”.

Wilbur L. Ross (New Jersey, November 1937) has been in Spain this week. In an interview with Expansión, the U.S. investor, president and managing director of WL Ross & Co. admits that with an unemployment rate of 27% he was not expecting to see buoyant cities like Madrid, Barcelona or Bilbao. “I am very impressed by the determination of the Government and the Spanish bank executives to face the problems. I leave the country calmer than when I arrived”, the millionaire added, who according to the Forbes magazine, has a patrimony of 2600 million dollars (around 2000 million Euros).

Ross, specialized in investment in distressed assets, firms being restructured o nearing bankruptcy, explains his target when visiting Spain: “To study the direct investment in Spanish banks or to purchase some of the real estate subsidiaries, as well as certain assets, either through Sareb or not”. A few hours after our interview, he was having a meeting with some of the executives from Sareb: “we see important discounts on the assets of the bad bank”. “We believe they have done well in applying them in order to be protected from future losses. We even think it could have a profit”, he declared.

On the other hand, the nationalized institutions have put the subsidiaries of real estate services on sale, such as Bankia with Bankia Habitat, Catalunya Banc with Catalunya Caixa Inmobiliaria or NCG Banco with UGAS. “This is a business we know well in the United States and we could transfer that experience over here”, he adds. He also declares that “we could buy portfolios of default credits”.

Several vulture funds, such as Apollo, Centerbridge, Cerberus or Fortress, have been analyzing this type of real estate assets for months and even years, but Ross does not think he has arrived too late. “There are still 750.000 properties to be sold, aren´t there? And Sareb has given a time limit of 15 years to get rid of these assets, although we understand it will not take as much time. The bad bank has just put on sale its first portfolio of properties in Seville and Valencia for 200 million Euros.

Ross´s firm has a broad experience in the acquisition of nationalized institutions. In the United States it has bought five banks from the FDIC, such as BankUnited in Florida or Sun National Bank in New Jersey. At this side of the Atlantic it has acquired Northern Rock and Bank of Ireland. For this reason, and in view of the good results obtained, they are ready to look into the nationalized Spanish banks, such as NCG Banco and Catalunya Banc.

The U.S. investor admits that housing prices in Spain “could continue dropping another 10% from the current levels”. “Should the correction go any further, some problems would arise”. He considers that “if it is not the best time to invest in Spain, it is getting very near”.”It is clear to us that Spain is understanding its problems, not only the dramatic situation of its real estate sector, but also the loss of competitiveness, the high production costs, etc”. That is why Ross believes that the Government “is doing things well and, even though any progress will take time, the seeds for growth have already been planted”. There are not only advances in Spain, but also in the Eurozone. “Remember that when the crisis started, when Greece burst, the European Union had not the correct tools to face any of this”.

Ross praises the way the European Central Bank has faced the crisis, mainly since Mario Draghi holds the presidency. He remembers the key moment when the Italian declared that he would anything which is necessary in order to save the Euro. “I believe the crisis would have finished earlier if Draghi had lead the bank sooner”, he adds. “The institution was obsessed with the idea that its only mission was to control prices, but now inflation is the last problem Europe is facing”. However, he explains that the ECB should have more importance as a sort of tax authority at European level.

Spanish banks need 10.000 million Euros.

Spanish banks will need to reserve extraordinary provisions of up to 10.000 million Euros in order to cover doubtful loans, according to the last calculation of the Bank of Spain.

In view of the last figures, the financial institutions refinanced more than 200.000 million Euros in credits prior to their maturity date, partly because the borrowers could not face the payment of the whole debt in the established deadlines.

The calculation of 100.000 million Euros is the first official estimate made of the possible impact of the new requirements of the Bank of Spain in reference to the refinanced loans.

The Bank of Spain believes that the risks linked to this practice, known as “to extend and to pretend”, have not been covered and this is why the institution is putting pressure on all banks so that they reclassify  their refinanced loans before the end of September, so as to comply with the new regulation, stricter than the previous one.

According to the new rules, banks will face more difficulties when classifying refinanced loans as if they were normal loans, forcing institutions to increase their provisions.

A high executive, in an interview with the Financial Times, has declared that “our banks will need more provisions”.

“These provisions will affect results, but we still do not know to which extent. We cannot know it right now, but we believe that extraordinary provisions of around 5000 and 10000 million Euros will be necessary”, he added.

It is planned that these new provisions will affect results negatively, at a moment where institutions have seen their profit reduced in their own market.

Spain continues immersed in a recession that has been going on for two years, and in which companies and homes have suffered the consequences of the burst of the real estate bubble and the unstoppable increase of the unemployment.

Both analysts and Spanish authorities believe that the new strategy of the Bank of Spain towards refinanced loans will force the weakest institutions that do not have international presence, to get more capital through the sale of assets, capital extensions or asking for more money from the banking rescue fund.

However, the high executive of the Bank of Spain was convinced that “banks will be able to face this situation”, taking into account that the provisions will not have to be done all at once, but depending on the due date of the refinanced loans.

According to experts, the financial impact will be much higher on the smaller institutions; the more solid banks with an important international presence such as Banco Santander or BBVA, generate enough profit to assume the extraordinary provisions easily.

The situation of the institutions that were nationalized last year is especially worrying. Bankia, that has become the example of the Spanish banking crisis, has most of the assets that are currently in the hands of the state.

Source: Expansión

Bankia will offer more than 2000 properties from Sareb with discounts of more than 32%.

More than 300 of these 2000 properties are located in the region of Madrid, more than 800 in the Valencian region and more than 200 in Andalusia.

This commercial initiative, the first one Bankia is carrying out jointly with the properties within Sareb, will take place in the office of the real estate company Roan, with whom Bankia has signed an agreement. Within this selection of assets there are properties for principal residences as well as on the coastline from 45000 Euros, as well as newly built properties.

The institution will offer, for example, properties in the Carabanchel area in Madrid from 92000 Euros, or in the Vallecas neighborhood from 69000 Euros, with up to 25% discount. In Alcalá de Henares (Madrid) it is possible to find properties from 105.500 Euros, with a discount of up to 25% and in Getafe (Madrid), from 181000 Euros, with 14% discount.

As for the ones located on the coastline, in Oropesa (Castellón) there are properties from 48500 Euros, with a discount of up to 25%. In Moncofar (Castellón), 250 meters away from the beach, there are two and three bedroom properties from 53400 Euros, with a discount of up to 25%.

In some properties there are discount of up to 150.000 Euros on the initial selling price, as in a house at Villaviciosa de Odon (Madrid) for 187.000 Euros. There is also the offer on a house in Punta Umbría (Huelva) for 357000 Euros, a price 100.000 Euros lower than the initial one.

In order to make sales easier, Bankia is also offering financing to buyers through a mortgage for up to 100% of the investment, with a limit of 80% of the valuaton.

Bankia Habitat sold more than 5600 awarded assets in 2012, 23,6% more than the previous year. The bank has perceived 500 million Euros, which is an increase of 18,9%. (…)

Source: Expansión

Banks, the kings of the real estate exhibitions.

Next week the Spanish real estate sector will reunite in a meeting that used to be unavoidable for the big names in the construction business for years. Today, after five years of financial and real estate crisis, the real estate exhibition in Madrid (Sima) will reopen between the 30th May and the 2nd June with new leading actors and a clear goal: to sell properties.

“The importance of the real estate sector has been reduced significantly. There is less activity and there are less companies”, Eloy Bohúa, director of Planner Reed, organizer of the fair, explains. “The crisis is redefining the role of the different actors in this market, especially the financial institutions, whose strategies in the residential segment are decisive for the whole sector”, Bohúa adds.

The director of the exhibition provides one of the keys for the change of scenario experienced within the sector which is reflected in the number of exhibitors that will attend the most important real estate fair in Spain: the predominance of financial institutions.

No great developer or real estate company will attend this year´s edition of the fair. In exchange, the subsidiaries of Santander, Bankia, CatalunyaCaixa, Popular, Sabadell and BBVA have confirmed their attendance. There will also be traditional real estate companies such as Level, Hercesa, Habitat, and the subsidiary of Iberdrola.

There will be in total 150 exhibitors – a similar figure to last year´s – that will offer bargains during the fair such as the assumption of the VAT, although discounts will not be the essence of the offer. “Discounts have lost importance as the main selling argument: discounts in reference to what price? To the one from last year or two years ago? We now see that efforts concentrate in communicating as clearly as possible the features of the product. The price does have an influence, of course, but also does the location or services. The buyer is more and more informed, he knows what he is looking for and what he is ready to pay and in a growing percentage of cases, what financing he can get. One of the positive consequences of the crisis is that the market is getting more and more transparent”, he assures.

Although most companies within the sector are centered in reducing their debt, experts believe that the developer is also a key figure.

Most banks have chosen to sell the awarded properties directly, but they need to get rid of the stock of finished properties and of plots, which do not find a buyer nowadays. “We will see a growing cooperation between financial institutions and companies in order to get rid of plots that can materialize in viable projects. All this will be followed by a greater professionalization in all spheres of the activity”, the director of Sima forecasts.

The sale of properties to foreigners has been growing for 21 consecutive months.

According to the Ministry of Infrastructure, the transactions carried out by foreigners residing in Spain have grown for the seventh consecutive quarter (21 months). In particular, 5% over the first quarter of 2012, with 8457 purchases.

The total percentage of purchases carried out by foreigners residing in Spain reached 15,5%, the highest rate in history.

The percentage of purchases carried out by non-resident foreigners reached 792, which means in increase of 40% over the same period last year, although it is not a very significant figure. Meanwhile, the purchases of properties collapsed in the first quarter (54.512 transactions, a decrease of 21,5%).

The energy certificate: What is it? How much will it cost? How will it affect the rental market?

From the 1st June onwards, an owner who wishes to sell or rent his property will need to have an energy certificate for it in order to know how efficient it is from the point of view of the energy saving. A classification already followed by home appliances and that ranges from A, for the home that saves more energy, to G, the most inefficient one.

It has not come into force yet and the Organization for Consumers and Users (OCU) already criticises that the authorities impose on individuals the obligation of obtaining an energy certificate when selling or renting properties that will mean a cost of an average 250 Euros per property. However, David Caraballo, commercial director of Alquiler Seguro, reminds that it is a norm which is in force in Europe and therefore “intends to coincide with our European partners”.

In this sense, “at Alquiler Seguro we are already providing this certificate, as it will necessary both to rent and to advertise a property on sale”. As reminded by those at the real estate website “the label will be included in any offer, promotion or advertisement for the sale or lease of a property, clarifying it is compulsory to have the certificate in order to advertise the property, either in the shop window of any branch or in the website. As the disciplinary regulations are still being processed and many regions do not have an official registry or a team of inspectors, it is very probable that there will still be no penalties starting from June 1st.

However, once the transition period has passed, the possession of a certificate will be essential, not only to advertise the property, but in order to sign deeds of sale or the rental agreement, as the new owner or tenant can press charges against the seller or the landlord if they do not have the certificate.

Carlos Ruiz, manager at Arrenta, thinks it will be very difficult to control the implementation of the energy certificate in all rented properties, as the agreements are signed between individuals. He also reminds that the black market in Spain will make it probable that owners or landlords do not have it especially if they need to pay between 150 and 200 Euros, depending on the size of the property.

The energy certificate, which will have a validity of ten years, will only be requested for those properties that are put on sale or for rent from the 1st June onwards and not to those which are already rented.

Carlos Ruiz and David Caraballo do not think the classification of the energy certificate will be determining when renting a property. “The price, the location”, will continue to be the key factors when deciding for one property or another.

Even though Caraballo does think that it will help to have access to subsidies for rentals, as in order to receive them, the bond needs to be deposited at the corresponding organism and the property needs to have a certificate.

Miguel Angel Alemany, director of, believes that “when a tenant looks for a property, they do not only look at the rent it will have to pay every month, they also take into account different added costs such as the neighborhood association fee or the supplies. The energy certificate plays an important role in this last aspect. In order to avoid an excessively high electricity bill, we all try to consume as little as we can, using energy-saving bulbs, but the problem can be within the house”.

Alemany also thinks that “it can be received with some rejection”, but he does not think the offer of rented properties will decrease abruptly from June 1st. “We think that the cost of the certificate will have an effect on the rent somehow, increasing the monthly rent or trying to convince the tenant to pay for some other costs, such as the neighborhood association fee or the garbage fee.

Project Bull: the first great operation of the “bad bank”.

The company created to check-out toxic real estate assets for more than 90.000 million Euros prepares its first great sale operation for the next 18th July. It will be called “Project Bull” and in order to manage it, Sareb has hired KPMG.

As informed by Bloomberg, the consulting company has identified a “pool” or package of properties in Andalusia and Valencia, as well as unfinished buildings, that will be put on auction on the 18th July, with a forecast of collecting at least 200 million Euros, according to the sources consulted by the agency. It will be the first serious test that will measure the capacity of the bad bank to attract investors interested in its assets.

“The success in the first sale would be a sign that there are opportunities here”, the analyst of the Royal Bank of Scotland, Lee Tyrrel-Hendry explains. In his opinion, the investors are looking for good profit and Spain is one of the rare places that offers it, but this is due to the fact that “there are still a lot of risks and the economic forecasts continue to be very weak”, this expert points out.

The most important vulture funds in the market, such as Colony Capital or Apollo Global Management are awaiting this operation and will try to take advantage of the burst of a bubble that has reduced prices by nearly 40% from the peak reached in 2007. Their participation is vital for Sareb, as most of its forecasts depend on its capacity to attract foreign capital. Only this year it needs to sell assets for around 1500 million Euros. And in the next five years it intends to sell 45.000 properties, half of its portfolio.

The first sale of Sareb – the core of “Project Bull”- includes 38 finished housing developments (most of them located in Valencia and Andalusia) and at least another unfinished project. For Scott MacDonal, analyst at the company MC Asset Management, Sareb “will probably find buyers” as there is now a real interest in finding assets in Spain. The liquidity injections of central banks have impelled investors to look for opportunities and to demand riskier assets.