17 November 2017 – Expansión
Sabadell has decided to go one step further in its strategy to clean up its balance sheet. To this end, the entity has engaged Alantra, KPMG and PwC to sell the real estate assets that it inherited during the crisis, which amount to approximately €12,000 million. The plan involves dividing that volume of doubtful loans into three different portfolios, with the aim of facilitating their digestion in the market. It would be the largest portfolio sale ever carried out by the entity, which has divested €1,750 million in toxic loans and assets so far this year.
Financial sources say that the firms engaged to sell the portfolio have already started to sound out the market in search of potential buyers. If everything follows the agreed timetable, the operation will come onto the market during the first few months of 2018 with the intention of being closed at some point next year. The bank itself declined to comment on the news.
Protection of assets
Most of the toxic property that Sabadell plans to sell was inherited from Caja de Ahorros del Mediterráneo (CAM) and was acquired in the summer of 2012 under an Asset Protection Scheme (EPA) capable of covering losses of up to €16,610 million. The EPA, which is valid for up to 10 years following the purchase, covers Sabadell for 80% of the loses incurred on the savings bank’s asset portfolio, whose value at the time amounted to €24,644 million. The potential cost of those losses is assumed by the Deposit Guarantee Fund (FDG).
Now, five years after the purchase of CAM, Sabadell has managed to divest 51% of the doubtful loans. This means that €11,940 million still remain on the bank’s balance sheet.
Sources in the market indicate that pressure from the Bank of Spain for entities to clean up their balance sheets, especially those linked to EPAs, has been one of the reasons that has led Sabadell to launch this operation. The supervisor wants to liquidate these agreements to free the FGD from further charges and to open the door to a new European fund. This comes in addition to the renewed investor appetite towards these types of assets.
“We have seen that there is significant demand from international funds in relation to the banks’ portfolios of non-performing assets. Nevertheless, the supply is immense and it is important to choose the timing very carefully to avoid having to offer excessive discounts”, explain the financial sources.
In addition to Sabadell, other Spanish entities have stepped on the accelerator with the sale of toxic assets in 2017. So far this year, 10 entities have managed to divest up to €36,458 million. It should be noted that the aforementioned figure has been significantly impacted by the macro-operation undertaken by Santander, which sold 51% of Popular’s real estate, worth €30,000 million, to Blackstone.
In fact, Sabadell’s effort to reduce its doubtful loans has been one of the arguments most used by analysts to support the significant rise in share prices on the stock market in its reports. Before the crisis in Cataluña started to undermine the confidence in the markets, the entity saw an increase of up to 49% in its share price, to €1.94.
Original story: Expansión (by Andrés Stumpf)
Translation: Carmel Drake