19 October 2015 – Expansión
Over the last year, most of the listed banks have continued to reduce the volume of mortgages for which they finance more than 80% of the value of the property – the percentage that is regarded as the normal maximum for a primary residence -. During the six months to June, Spain’s eight listed banks granted mortgages of this kind amounting to €52,814 million, which represented a decrease of 3.7% with respect to the previous year. This type of product, which by its nature involves higher risk, is penalised by banking regulations, since the capital required to support it is greater than the amount needed for mortgages with lower loan to value ratios.
Bankinter recorded the highest increase, up by 32.7%, to €930 million. The entity says that the increase is due to an accounting change and that, without that effect, the increase would be around half (of that figure). It insists that it does not finance 100% of homes, except in very exceptional cases. Moreover, Bankinter stresses that these (high LTV) loans represent a small percentage of its total mortgage portfolio, just over 5%, which is well below the average for the sector.
In the case of Popular, the YoY increase of 23%, resulted in a total of €2,598 million. Sources at the bank attribute this increase to the initiative by the bank to sell its own homes. “These loans are granted to finance (the purchase of) homes from Aliseda (Popular’s real estate arm); otherwise, we only finance LTVs of up to 80%”. During the first half of this year, Popular sold own properties worth €1,172 million. Loans with a loan to value of more than 80% represent 15% of the bank’s mortgage portfolio. However, its default rate is almost half the sector average, at around 8%.
The other bank that recorded an increase in this kind of loan is BBVA, although the rise there was much more measured. The increase amounted to 3%, taking the loan balance to €13,903 million, i.e. 15% of its total stock. The entity explains that the increase was due solely to the incorporation of balances from the CatalunyaBanc group, which were included at the end of the second quarter. The former savings bank was acquired by BBVA free of all non-performing mortgages, as the doubtful loans had been sold to Blackstone. Nevertheless, the healthy mortgage portfolio contained lots of loans with high loan to value ratios.
All of the other listed entities reduced their stocks of this kind of loan during the last year. The most marked decreases were recorded by CaixaBank and Bankia, with -13.8% and -12.8% reductions, respectively. Sabadell’s stock decreased by more than 5%; Santander by 3%; and Liberbank by almost 2%. The bank led by Ana Botín is, nevertheless, the one that accounts for the greatest number of these loans over its total mortgage portfolio, with more than 27%.
Selling their own homes
The banks insist that they do not offer these mortgages for third party assets. They only do that in very exceptional cases when the borrower is very solvent or has guarantors, or is able to offer a double guarantee.
By contrast, they do offer this kind of mortgage on a mass scale to sell their own homes. In this case, the entities prioritise their aim to reduce the volume of properties on their balance sheets and to do this, they offer clients added benefits. In fact, these mortgages tend to not only have a higher loan to value ratio, they are also cheaper and are less onerous on clients in terms of contracting other products (from the same bank). (…).
Original story: Expansión (by Michela Romani)
Translation: Carmel Drake