• Transaction / Assets
    BBVA Sells €1-Billion Portfolio of Development Loans to Canadian Fund
  • Seller
    BBVA
  • Buyer
    CPPIB
  • € MM
    1000

BBVA Sells €1-Billion Portfolio of Development Loans to Canadian Fund

16 June 2018

The bank’s real estate exposure in Spain will fall to almost nil by the end of this year, after having been reduced by some 21 billion euros over the last two years.

BBVA is taking its last steps in its quest to eliminate the risk stemming from the toxic assets it inherited from the swift end of the real estate bubble. Yesterday, the bank finalised the sale of a portfolio of loans to developers valued at approximately 1 billion euros to the Canadian pension fund CPPIB, sources in the financial industry stated.

It is the largest sale of a specialised portfolio of loans to developers in the Spanish market. The developments included in the transaction, baptised Sintra, can be found throughout Spain.

The financial institution had been probing the interest of opportunistic funds since the end of 2017, looking to rid itself of a portfolio valued at a gross amount of about 1.5 billion euros, as reported by Expansión. Large funds, such as Lone Star, Blackstone and Apollo, were believed to have been interested in such credits, which are tied to real assets.

PwC advised the bank on the transaction. Official sources at BBVA declined to comment. With this latest sale, BBVA will reduce its exposure to the real estate sector to almost nothing. Pressure from national regulators and the need to free up provisions added to the bank’s efforts to sell off the toxic assets.

Early success

BBVA’s gross exposure to real estate stood at €15.352 billion as of March. Taking into account the sale to the Canadian pension fund and a separate transfer of assets to a company controlled by the fund Cerberus, the bank’s risk linked to property will be reduced to just €1.352 billion. That is €20.783 billion less than at the end of 2016.

The bank will thus achieve its goal of reducing its real estate exposure almost entirely a year and a half ahead of schedule.

BBVA has been one of the most active financial institutions in real estate sales since the beginning of 2017. The most relevant transaction was the bank’s agreement with the American fund Cerberus to create a joint venture in Spain. The operation was negotiated last November and is expected to be finalised in September.

The real estate assets covered in the agreement include some 78,000 properties with a gross book value of €13.billion. Cerberus will control an 80% stake in the company, while the bank will hold on to the remaining 20% while managing to shed the toxic assets from its balance sheet.

However, BBVA has also negotiated several other major real estate transactions. In mid-2017, the bank sold the Jaipur project, another portfolio of loans to developers valued at 600 million euros (total gross debt at nominal value), to Cerberus.

The bank has also reduced its exposure to companies linked to the real estate market. This was apparent in Metrovacesa’s IPO this year, which relieved the bank of its 27% participation in the company.

37% of product sales are conducted online

BBVA has doubled the group’s digital sales. In the first four months of the year, 37.5% of the financial institution’s total sales were conducted through digital channels.

The bank is doubling down on its digital strategy, foreseeing “accelerated and consistent” growth in the number of its customers that access the bank’s products through these channels, it announced yesterday.

The trend has led the bank to bring forward its objectives in its digital transformation. The financial institution expects that 50% of its customers will access its services using digital means by the end of this year or at the beginning of 2019.

In March of this year, when the bank presented its most recent audited accounts, BBVA had 19.3 million customers who used mobiles to access the bank’s products and services, an increase of 43% compared to March 2017. That is equivalent to one-third of its total customer base.

Now, the bank expects to reach the milestone of having half of its customers accessing using digital means.

At the moment, the bank has 24 million customers that access digitally, equal to 45% of its total customer base, a growth of 25% compared to March 2017.

Tangible benefits

The bank argues that its digital strategy has tangible benefits on its accounts by improving efficiency and boosting recurring revenues. In fact, the group is already profitable in all the markets in which it operates, including Spain.

BBVA justifies its digital focus stating that such customers acquire more products and stay loyal.

In fact, they have an abandonment rate that is 57% below that of traditional users. The biggest differences are in Mexico, Turkey and Spain.

Original Story: Expansión – R. Sampedro

Photo: JM Cadenas / Expansión

Translation: Richard Turner

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