Santander has refinanced loans for a gross amount of 55714 million Euros, according to figures made public by the institution in order to comply with the new transparency requirements imposed by the Bank of Spain on restructured portfolios. The group closed 2012 with a volume of gross credits of nearly 746.000 million Euros, which means it has renegotiated 7,4% of the awarded loans. The supervisor, complying with the commitments accepted by Spain in the banking rescue, forces all institutions to inform about the refinancing procedures. These operations are under the scrutiny of investors since the beginning of the crisis, as they consider this could be a way to delay the recognition of the delay.
Out of the 55714 million Euros renegotiated by the whole Grupo Santander, 23% (12780 million Euros) are refinancing procedures of doubtful balances. The remaining 77% (42.934 million Euros)are credits whose conditions have been renegotiated before being default.
As for the renegotiated doubtful debts (12780 million Euros), 7100 million Euros are still in the default portfolio after the refinancing. The remaining 5600 million Euros have been reclassified in other categories with less risk: 3601 million Euros have been transferred to a portfolio of normal credits; and another 2079 million Euros are now classified as substandard. Should this reclassification not have taking place, the balance of doubtful credits would have been even greater. The default rate at Santander is 4,54%, with default risks of 36.100 million Euros.
The reclassification of default credits after their renegotiation is a part of the banking operations, if specific requirements established by the regulator are met. In this case, there are further conditions established by the own bank.
“These operations (of doubtful balances) do not mean a liberation of provisions, as they maintain the classification of a doubtful risk, unless they comply with the criteria of the Bank of Spain”, Santander stresses in its annual report. The client needs to pay the ordinary interest rate, contribute with new guarantees and a reasonable certainty of his capacity of payment. The bank follows additional “caution criteria”. Among these, the debtor needs to be up to date with his payments during a period of time that depends on the operation and the guarantees. (…)