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The real estate subsidiary could affect the accounts of BBVA.

The profit and loss account of BBVA in Spain could be affected negatively depending on the evolution of the real estate business of the bank, Francisco González, president of the institution, declared yesterday. He wished to distinguish two separate parts in the activity in Spain: the traditional business, “which generates very good results”, and the real estate activity, “that could affect the accounts of the bank in Spain”. It was his way of avoiding the fact that the bank, like the rest of institutions in Spain, will register losses in their global activity in Spain due to the deterioration of the margins, the increase of default and provisions, and the limited success of any activity related to the real estate sector.

González also referred to the minimum limit clauses. “The Supreme Court has stated that they are legal, but transparency criteria are now required which were not demanded previously”, he pointed out. “There has been a change in the conditions”, he stressed, in order to justify the decision of the bank to remove the minimum limit clauses from all their mortgages. He declared being convinced that the rest of institutions would do the same as BBVA had done as soon as the complaints from customers got to the Supreme Court and this one ruled the same as it had against BBVA, Cajamar and Novagalicia Banco.

González indicated as well that it is too soon to know if the Spanish financial system will need or not any new European resources in order to reinforce its solvency and liquidity, because the “effort tests carried out by the ECB and the European Banking Authority at the end of the year or at the beginning of 2014” will show which will be those needs.

The banker thus clarified the affirmations made by the Ministry of Economy, Luis de Guindos and the Secretary of State of Economy, Fernando Jiménez Latorre, in the last few weeks, declaring that they do not believe a new aid program or an increase of the current one will be needed. They consider that the new provision and capital requirements will be much less than those of last year, and that the financial system and the Treasury through the FROB, could provide those resources.

According to González, the resolution of the financial system crisis will not be near until the FROB sells the institutions it now controls and clarifies its solvency level. It will have to be done with the criteria finally adopted at European level, and once they know which will be the liquidity requirements established by the authorities.

Source: Expansión