The Catalan bank is looking to sell a portfolio of problematic assets despite the market downturn and is evaluating the divestment of 1,000 delinquent SME loans.
The bank chaired by Ana Botín has reported that the signing of mortgages fell by 60% in April and that 45,000 clients have taken up the mortgage moratorium.
On Tuesday, Banco Santander presented its results corresponding to the first quarter of 2020. The company has reduced its profit by 80% after making an extraordinary provision of €1.6 billion to mitigate the impact of the Covid-19 coronavirus on its business.
The financial institution has raised its loan loss provisions by 80%. In this way, the doubtful portfolio has gone from 68% recorded at the end of 2019 to 71% in March. The default rate, which does not yet reflect the impact of the crisis, stands at 3.25%, slightly below the figure registered in December (3.32%)
Investors are already working to launch several portfolios onto the market. They want to activate proceedings as soon as the State of Emergency comes to an end in order to execute them this summer.
The large international funds have decided to accelerate their divestments in Spain, due to the impact on the economy of coronavirus. In this way, these investors have changed their sales policies, given that during the previous crisis, they made massive purchases of portfolios from banks, according to El Confidencial. Now, they have chosen to reduce their prices to close said divestments.
The funds are already working to launch several portfolios onto the market, a move they want to activate as soon as the State of Emergency ends. Their aim is to execute deals very quickly over the summer, in order to close the agreements before autumn, according to various sources involved.
The depreciation in house prices will put borrowers and their portfolios at risk, and so the volume of doubtful and non-performing loans may increase.
Unsecured loans such as unpaid credit card balances and unsecured consumer loans will be more sensitive to rising unemployment and household debt in Europe as a result of the coronavirus outbreak, according to a report released today by Moody’s.
Consumers who are under financial stress after the Covid-19 crisis are more likely to suspend payments on those loans, said the agency. It also considers that recoveries after default are likely to be low, given the lack of collateral. “The degree of weakening in the performance of the agreement will depend on the sharpness and duration of the recession and the exposure of the transactions to borrowers with a higher probability of interrupted income, such as self-employed workers and temporary contractors,” explains Rodrigo Conde, analyst at Moody’s.
The servicer is going to apply a cut of 20% for two thirds of the workforce for six months, and of 50% for the remaining third for three months and of 20% the following quarter.
The manager Servihabitat, which is owned by Lone Star (80%) and CaixaBank (20%), closed an agreement with its workforce at the weekend to apply a temporary employment regulation file (ERTE) of between 20% and 50%. The real estate platform will pay a supplement so that all of its employees receive between 70% and 90% of their gross salaries, according to El Confidencial.
Servihabitat, one of the largest servicers in Spain, has been the entity that has taken the greatest employment measures to adjust to the economic shutdown. The company has about 800 employees. Intrum, the owner of the former Aktua, Lindorff and Solvia, is also conducting an ERTE for 600 professionals.
Axis expects to see a massive sale of non-performing loan portfolios before January 2021, since the banks will be keen to remove those assets from their balance sheets.
The consulting firm Axis Corporate predicts that, as a consequence of the impact of the global crisis caused by Covid-19, there will be a massive sale of portfolios comprising non-performed loans guaranteed by mortgages (NPLs) during the last quarter of 2020 in the real estate sector.
According to José Masip, a Real Estate Partner at Axis Corporate, “in this scenario, two ingredients are coming together in the face of uncertainty: buyers who, in the context of this new shock environment, may or may not see the market uncertainty as an opportunity, and sellers who are not willing to modify prices and who are able to evaluate the best option within their ‘possibilities’.
The firm is making its debut on the stock market in the midst of the coronavirus crisis and has started to trade at a price of €8.36 per share.
Home Capital has leapt onto the Alternative Investment Market (MAB). The Socimi, which is dedicated to the rental of apartments for professionals on business trips, has received approval from the stock market regulator to start trading on the MAB at a price of €8.36 per share, which means a company valuation of €50.2 million.
The firm is making its debut on the alternative market in the midst of the coronavirus crisis and has already warned that “it (the crisis) could have a material and negative impact on the balance sheet, results, economic outlook and assets ” of the company, according to Europa Press. Specifically, the Socimi has warned that business travel will be affected by the crisis, which will directly affect its turnover given that it is driven by the rental of apartments to professionals.
The firm is owned by Timón (26%), the Polanco family’s real estate company, and is chaired by Borja Jesús Pérez Arauna, who in turn has an indirect stake of 6.84% in Timón. Specifically, the Socimi’s business objective is to invest in residential buildings in order to renovate them and then dedicate them to medium-term corporate leasing.
Santander Small Caps and Brandes Investment have reduced their stakes in Renta Corporación and Lar España, respectively, to less than 3%.
The significant decreases suffered by practically all the stock markets around the world, with the exit of thousands of investors, has left changes in two of the large Spanish listed real estate companies.
Such is the case of Lar España. The company specialising in shopping centres, which was due to hold its annual shareholders’ meeting this week, has seen the company Brandes Investment Partners reduce its stake in the Socimi to below 3%, according to the registers held by Spain’s National Stock Market Commission (CNMV). In this way, Brandes Investment, which first acquired share capital in Lar España in August 2016, has gone from owning 5.03% to 2.94%, its smallest stake since becoming a shareholder.
Another real estate company, Renta Corporación, has also undergone changes in its reference shareholders. In its case, the manager Santander Small Cap has reduced its stake in the company, down from 3.55% to 2.32%, according to the CNMV. This is the first move by the Santander firm since June 2019 when it first acquired a stake in Renta (3.5%).
The effects of the coronavirus are also impacting the sale and purchase of homes and the signing of mortgages: at least 30,000 home loans are in danger, if we look back at the number signed in March 2019 by way of reference. Specifically, 30,176 mortgage contracts, according to data from INE. The stoppage of notary, registry and commercial procedures, but above all, the uncertainty surrounding the impact of the fallout on employment and households have paralysed most purchasing decisions, in particular, home purchases.
The effects of the coronavirus are also impacting the sale and purchase of homes and the signing of mortgages, at least in March and April. More than 30,000 home loans are in danger, if we look back at the number signed in March 2019 by way of reference. Specifically, 30,176 mortgage contracts, according to data from INE. Meanwhile, the Government is already beginning to take measures in relation to the real estate sector: on Tuesday, it agreed to postpone the mortgage repayments of those people in situations of economic vulnerability affected by the coronavirus crisis.
This is a measure that banks already expected. They have also asked for the provisions required by law to be relaxed. Why? Because based on the current banking regulations in Europe, a moratorium on the payment of mortgage repayments would force the affected loans to be reclassified as doubtful, known as NPLs (Non-Performing Loans), which would trigger the obligation for the banks to dispose of them through portfolio sales to avoid being penalised.
The property developer led by Borja García Egotxeaga is continuing with all of its construction projects, in accordance with the necessary safety parameters, with the aim of minimising the impact on its activity.
The company Neinor Homes, one of the three largest property developers in the country, has announced that it will maintain its construction activity despite the health alert generated by Covid-19. The real estate company, which had been planning to deliver between 1,700 to 2,400 homes this year, has indicated that it is making the “utmost effort” to continue its activity in the construction sector, with the aim of trying to avoid “serious consequences” for the market. To this end, it is asking for maximum collaboration between the Public Administration and agents in the sector.
“At an operational level, all the company’s building projects are still underway for the time being. Moreover, Neinor Homes is making every effort to continue activity at its sites in accordance with the safety parameters that are always necessary, with the aim of minimising the impact”, said sources at Neinor. “However, given the impossibility of predicting the evolution of this situation and the fact that the health and safety of all of our workers is always our absolute priority, the company will adapt its construction plan, in coordination with the construction companies, to ensure that they are affected as little as possible, “they added.