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Banks Delay Property Sales & Await Higher Returns

11 August 2015 – Cinco Días

Spain’s banks are delaying their property sales and are instead waiting for conditions in the market to improve significantly before they increase their rate of sales. That was the conclusion of a report published by the ratings agency Moody’s in May about the management of the property glut still sitting on entities’ balance sheets, which now amounts to €83,000 million. And the trend has been confirmed by the (most of the) banks themselves in their recent half-year results presentations. (…).

In particular, Santander, BBVA, CaixaBank, Sabadell, Popular and Bankia sold 32,397 properties in total during the first six months of 2015, which represents a decrease of 18% with respect to the 39,241 transactions recorded during H1 2014.

However, the transactions this year have been closed with average discounts of around 35% – a significant improvement on the  60% discounts that the entities were forced to accept just a few years ago, as they desperately tried to get rid of the assets they had accumulated on their balance sheets following the burst of the real estate bubble. Some entities are now even generating profits from the sale of properties.

That is the case of BBVA, which recorded profits of €36 million from the sale of real estate assets worth €456 million during the last quarter. This turnaround enabled the entity to reduce the losses from its real estate arm to €300 million during H1 2015, which represents a decrease of 35% on the negative figures it recorded a year earlier. And it achieved this result selling half as many properties, with 5,190 transactions closed in the 6 months to June 2015, compared with 11,402 in H1 2014.

Banco Santander also reported similar success…the entity sold 5,200 properties during H1 2015, compared with 6,000 during H1 2014…it closed Q2 2015 with the “smallest quarterly loss” ever since the creation of the bank’s RE arm.

Meanwhile, Banco Sabadell reduced its sales volume by a third from 7,541 during H1 2014 to 5,190 in H1 2015, and with lower discounts – specifically, with an average reduction to gross value of 46.4%, versus 52.4% last year and 60% in 2013.

CaixaBank sold 5,907 properties in H1 2015 compared with 7,392 in H1 2014…and has also offered lower discounts this year.

However, two banks stand out as the exceptions to the rule – Bankia and Popular – which actually both increased their sales volumes during H1 2015. The former sold 3,345 properties in H1 2014 and 4,135 in H1 2015, with discounts this year of 35%…(…). Meanwhile, the latter really bucked the trend, with the sale of 1,172 properties in H1 2014, increasing to 4,135 in H1 2015, whereby doubling its revenues from asset sales…(…).

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake