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Santander to Reduce its Toxic Assets to Zero by September

17 July 2018 – El Economista

Banco Santander is on the verge of saying goodbye to the great burden left behind after the crisis: the delinquent loans and properties. The entity is preparing for the sale this summer of a portfolio of toxic assets worth between €5 billion and €6 billion, which would leave its balance sheet virtually clean of property. The bank headed by Ana Botín is planning to close the operation, which is already underway, before the start of September, according to market sources.

In this way, the entity would manage to get rid of almost all of its leftover real estate in just one year. After acquiring Banco Popular, the bank saw its non-performing assets increase by €41.1 billion. Nevertheless, it found a quick exit after putting the portfolio containing all of Popular’s properties, worth €30 billion gross, on the market.

In August, Santander closed that operation after transferring half of the assets to Blackstone, for a net value of €5.1 billion. The operation saw the two entities, the bank and the fund, create a joint venture to which all of the property was transferred and in which Blackstone holds a 51% stake and the bank the remaining 49% share.

The management of the assets is now in the hands of the fund. The company, which was constituted in the spring of this year, is called Quasar Investment, and also holds the assets that used to be held by Aliseda, the servicer of Popular. Now, the bank is looking to get rid of this final portfolio almost exactly a year later.

At the end of March this year, the last date for which data is available, the bank had a real estate exposure in Spain of around €10 billion, of which 50% was provisioned. The bank already announced at its most recent results presentation that its aim was to leave its balance sheet practically free of those assets during the course of this year.

For the time being, the funds potentially interested in the portfolio include Cerberus, Lone Star and Blackstone. Specifically, those three funds have starred in the largest portfolio purchases from banks in the last year.

In November, BBVA announced the sale of 80% of its property to the fund Cerberus. The entity transferred a portfolio comprising around 78,000 real estate assets with a gross value of €13 billion for a price of €4 billion. In this way, the bank positioned itself as the Spanish entity with the fewest toxic assets on its balance sheet with an exposure of €4.775 billion, accounting for just 1.5% of its total assets in Spain.

CaixaBank has been one of the last entities to announce a major operation. That bank closed the sale of 80% of its real estate on 28 June to the fund Lone Star and it transferred it 100% of its servicer Servihabitat. The gross value of the real estate assets amounted to €12.8 billion, and the net book value was around €6.7 billion. Once CaixaBank has completed the repurchase of 51% of Servihabitat (an operation that was announced on 8 June and whose execution is pending authorisation from Spain’s National Securities and Exchange Commission), the entity will transfer the real estate business to a joint company with Lone Star, in which it will retain a 20% stake.

S&P determined in a report published last Thursday that the Spanish banks are going to struggle to fully clean up their balance sheets of toxic assets despite the accelerated rate of operations that are being carried out. Analysts recognise that, although the entities are increasingly close to putting an end to their delinquency problem, it is going to be hard to completely clear the ground due to the poor quality of the remaining assets.

Original story: El Economista (by Eva Díaz)

Translation: Carmel Drake