CaixaBank & Bankia Lead Race To Exit RE

6 October 2015 – Expansión

For the banks, the race is on to reduce the weight of property on their balance sheets. In the last year alone, the major institutions have managed to reduce their overall exposure to the real estate sector (in terms of both properties and loans) by €45,150 million, or 23.6%, to €146,253 million. Of this balance, €98,870 million relates to property and the remainder to loans. These figures represent the gross book value, in other words, they exclude the provisions that the banks have been accumulating to protect themselves against the deterioration of the corresponding assets. After discounting these provisions, the real risk that these entities face amounts to around €40,000 million in each category.

Although the general trend to reduce real estate exposure is clear, the institutions have varying strategies and results when it comes to implementation. The numbers in the half year reports reveal that CaixaBank and Bankia are the entities that have made the most progress towards the target.

CaixaBank has managed to reduce its gross real estate stock by almost €1,000 million in the last year and has amortised another €5,116 million of its loans to property developers. The Catalan bank says that the recovery in the real estate market is enabling it to not only increase its sales of foreclosed assets, but also to reduce the corresponding losses, because it is selling a very similar prices to the net book values of the assets (gross book value less provision). During the period under review, CaixaBank has sold/leased properties worth €2,346 million, between its sales and rental activity.

In the case of Bankia, its total exposure to real estate has decreased by 17%. The properties on its balance sheet have decreased to €4,343 million and its loan balance has fallen to €1,493 million. It is worth noting that Bankia’s figures are much lower than those of its competitors because the entity transferred the majority of its toxic real estate assets to Sareb, just like the other institutions that received public aid.

Santander is the third entity in the ranking, recording a 13% reduction in its real estate exposure over the past year. The bank’s real estate stock decreased by €477 million YoY to €10,381 million, whilst its loans amount to €8,653 million, having fallen by more than 21%. The default rate on its loans is the second highest of the banks considered in the study, with a ratio of 66.3%, exceeded only by BBVA (with 67.8%). During the first half of 2015, Santander sold around 5,200 properties, which represented a reduction in the rate it had acheived in 2014. Nevertheless, the bank says that the discounts on its sales are now lower and in some cases, it is even managing to generate small profits.

Meanwhile, Popular, which is sixth in the ranking, is proceeding much more slowly. The entity reduced its RE exposure by 2.8%, however it still has the highest figure in terms of properties (€16,126 million) and property developer debt (€16,643 million). (…).

Bankinter’s situation is different, its exposure to property is significantly lower, less than €1,300 million, and the default rate on its loans to the sector is “only” 25%, i.e. less than half the sector average (54.6%). (…).

From the banks analysed, only two, Sabadell and BBVA, have increased their exposure to real estate over the last year. Sabadell’s stock increased to €9,227 million, meanwhile BBVA’s exposure to foreclosed assets rose by €2,200 million. (…).

Original story: Expansión (by Michela Romani)

Translation: Carmel Drake