23 August 2016 – El Economista
The losses suffered by Spain’s main banks in their real estate businesses are finally easing. During the first half of the year, those losses decreased substantially, by 26%. Even so, the figure is still high, amounting to €1,618 million in H1. In June last year, the losses stood at almost €2,200 million.
The five largest entities (Bankia is not included because it transferred the majority of its property-related activity to Sareb in 2012) are benefitting from the recovery of the economy, which is causing fewer property developers and families to enter into default, as well as leading to higher property sales. In addition, house prices are now rising in some Spanish cities, which is helping to improve revenues (from property sales).
In fact, between January and June, CaixaBank, BBVA, Santander, Sabadell and Popular managed to reduce the volume of foreclosed assets resulting from unpaid loans for the first time since the crisis, with a timid decrease of 0.02%, in gross terms – before provisions for valuation losses -. The portfolio of properties and land owned by those five groups in Spain decreased to €67,362 million.
All of the entities, with the exception of Sabadell, managed to cut their real estate losses. The Catalan bank increased its losses during the period by almost 24% to €427 million, which “ate up” half of the profits before tax that it had generated from its banking business in Spain. Nevertheless, that deficit was partially offset by gains made in the UK following its acquisition of TSB in 2015.
By contrast, Sabadell is the group that has reduced its portfolio of foreclosed assets the most, by more than 6%, as a result of higher sales. In the second quarter of the year alone, the bank chaired by Josep Oliu increased its revenues from the sale of foreclosed assets by 16%, to €475 million.
CaixaBank is the entity that reduced its losses from the real estate sector the most, recording a decrease of 58%. This property segment generated losses for the Catalan group amounting to €355 million, after its injection of significant resources into its main property developer, BuildingCenter, in recent years. (…).
Of the groups that managed to reduce their losses from real estate, Popular is the bank that experienced the lowest decrease, of 7.7%. The entity was forced to modify its strategy in this segment in the face of pressure from regulators and the markets. (…).
Popular, which ruled out the option of accelerating its divestment from homes during the first few years of the crisis, on the basis that it expected the sector to recover quickly, has recently designed a new plan to reduce its exposure to these types of assets as much as possible. It is now aiming to reduce its doubtful loans and homes balance by €15,000 million by 2018. (…).
The bank chaired by Ángel Ron has the highest volume of foreclosed assets on its balance sheet. In June, the value of its portfolio amounted to €16,473 million, which represented a YoY increase of 1.6%.
Meanwhile, the two largest entities, Santander and BBVA, decreased their losses from real estate by 10% and 30%, respectively. The evolution of their foreclosed assets, however, was different. Whilst the former increased its balance, by 4.2%, the latter decreased its balance by almost 1%. Despite the increase, Santander has the smallest portfolio of homes and land of the five largest financial groups in the country, mainly because it was not involved in the acquisition of any weak entities during the crisis (…).
Original story: El Economista (by Fernando Tadeo)
Translation: Carmel Drake