• Transaction / Assets
  • Seller
  • Buyer
  • € MM

Abanca Sells €1,400M NPL Portfolio To EOS Spain

14 June 2016 – Expansión

Two years after taking ownership of Abanca, the Venezuelan company Banesco has started to sell off the bank’s toxic assets. Yesterday, the financial entity headquartered in Galicia reported its first sale of non-performing loans, amounting to €1,385 million, which represents approximately 20% of its total NPL portfolio.

All of the loans were overdue and unsecured, which makes it one of the largest operations of its kind in recent years and also, concentrated in a single buyer.

EOS Spain, a company that specialises in collections management was the winner of the competitive process. It is headquartered in A Coruña and is a subsidiary of the international group EOS. The transaction generated profits of €57.4 million for the bank, according to a statement filed with the CNMV.

The auction generated significant interest, with participation from around twenty investment funds and entities specialising in the recovery of overdue debt. For this competitive process, Abanca was advised by KPMG, the same firm that audits its accounts.

The operation (…) will open a series of future transactions as part of Abanca’s strategy to divest of its non-performing assets. In fact, it says that it is already evaluating similar operations for its non-strategic assets, with the aim of focusing the business on providing credit to families and companies and to boosting the economy.

One of the upcoming operations will involve a portfolio of non-performing loans, secured by mortgaged assets, although that will be smaller than the portfolio just sold. By contrast, the bank will hold onto the other overdue unsecured loans so that they can be managed by Abanca itself.

For EOS, the purchase “represents the strengthening of its relationship with Abanca”, according to a statement from the bank, as well as an intensification of competition and an improvement in its position in the domestic market.

Improved capitalisation

The main effect of the sale has been on the solvency of the entity, given that it had fully provisioned all of the non-performing loans that it has now sold. Abanca calculates that with this transaction, it has improved its capital coefficient by five basis points since the first quarter of the year, when it stood at 14.8%, one of the highest in the sector. Meanwhile, the doubtful asset coverage ratio amounted to 60.8% during that same period. According to the annual accounts, Abanca had decreased its doubtful debt balances by 30% last year to €2,695 million as at December 2015; furthermore, it reduced the weight of foreclosed assets on its balance sheet to just 1%.

Of the total impaired asset balance, more than half (€1,900 million) are secured and only €114 million were overdue by three months or less (as at December 2015), according to details disclosed in the consolidated annual accounts for 2015.

Beyond its consolidated balance sheet, the entity accounted for €5,376 million of financial assets that it had written off. The bank explained that it was not including them on its balance sheet because it regarded (the likelihood of) “their recovery to be remote”, although it clarified that it has not stopped trying to collect the amounts due.

Original story: Expansión (by A. Chas and J. Zuloaga)

Translation: Carmel Drake

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