Banks Sell 35,000 Foreclosed Homes In H1 2015

3 August 2015 – Expansión

An increase of 10% / Bankia, Popular and Bankinter are leading the increase in house sales, due to a rise in demand, the macroeconomic improvement and the institutions’ appetite to grant more mortgages.

The divestment of the real estate assets continues to be one of the Spanish banking sector’s main priorities. The major entities in the country have sold almost 35,000 homes during the first half of the year, an increase of 10% compared with the same period last year, according to the half year results published to date.

Leading bankers have explained that the improvement in demand, thanks to the macroeconomic recovery and the re-opening of the credit tap, has facilitated this trend. “We have noticed a significant increase in retail demand”, said Francisco Gómez, the CEO at Popular, last Friday.

Just as important for this recovery is the fact that house prices have risen and are now coming into line with the levels that the banks have accounted for them on their balance sheets, following the provisions made in recent years.

Furthermore, the entities are now realising that they can sell their assets with lower discounts and in some cases, even make small profits. In this way, José Antonio Álvarez, CEO at Santander, reported at the entity’s results presentation, that discounts have decreased from 40% to 35%; and Carlos Torres, the number two at BBVA highlighted that his entity has obtained profits of €35 million from sales made during the first half of the year. Sabadell has also seen an increase in its sales prices.

Despite this increase, the balance of foreclosed assets on the entities’ balance sheets has remained stable and even increased slightly in some cases, given that the banks are continuing to convert loans into non-performing assets. At the end of 2014, the sector still held more than €80,000 million in homes, property developments and land on their balance sheets, left over from the crisis, according to figures from the Bank of Spain.

Bankia is one of the entities that has accelerated its sales in recent months, doubling them during the first half of the year. The CEO of the bank, José Sevilla, explained that these assets represent an unnecessary cost for the entity. For that reason, in addition to the sales it is making to individuals through its branch network, it has launched an operation to get rid of all of its foreclosed assets – Project Big Bang – worth €4,800 million, for which it will receive bids in September.

New asset managers

Sources at Popular, another one of the entities that has seen the greatest increase in sales during the first half of the year, note that another one of the key changes has been the entry of new professional management firms into the sector, following the sale of several real estate managers in 2013. “Our sales management has improved significantly thanks to the Aliseda operation. And we expect that trend to continue in the future”, said Gómez. Popular is set to exceed its goal of generating €2,000 million from the sale of properties in 2015.

Ibercaja also notes a “positive trend” with a 66% increase in the sale of homes. That entity has a similar plan to that of Bankia, i.e. to sell all of its foreclosed assets in the short-medium term, just like Kutxabank did last year.

On the other hand, the three largest banks have decreased their sales in terms of the number of units. These financial groups are focusing on reducing the discounts they offer, and they are under less pressure since their real estate arms have decreased their losses over the last year: by 38% in the case of Santander and by 35% in the case of BBVA.

Meanwhile, CaixaBank generated €2,346 million from the sale and rental of real estate assets in the last twelve months, an increase of 2.5% compared with the previous twelve months, according to data from the entity.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake