Sareb Recognises €2,044M Provision For Clean Up Losses

1 April 2016 – El Día

Sareb has recognised a provision amounting to €2,044 million after applying the Bank of Spain’s new accounting circular, which has resulted in losses amounting to €3,012 million on its loan portfolio.

According to sources at the so-called ‘bad bank’, the company will finance this initiative by converting €2,171 million of its own subordinated debt (into equity), which means that it will not require any additional capital. The company already made provisions amounting to €968 million in 2013 and 2014.

As a result of the tax impact of the clean up, Sareb closed the financial year 2015 with a net profit of €330,000.

The new accounting framework, which has forced the company to value all of its assets on an individual and frequent basis, also establishes the requirement to apply the impact of the clean up retrospectively and to reformulate its accounts for the previous year.

In this way, almost 90% of the provisions have fallen during the first two years of the company’s life, i.e. in 2013 and 2014.

During its three years of operation, Sareb has reduced the perimeter of its portfolio by around 15%, has generated total revenues of €12,801 million and has repaid €7,300 million of the debt that it issued to acquire the assets in the first place, which amounted to €50,781 million initially. In 2015 alone, Sareb repaid €2,051 million, said the entity in a statement.

At the commercial level, in 2015, the entity put 35,250 properties on the market and managed almost 28,000 proposals with property developers who hold debt with the company and are mostly SMEs.

The business in 2015

The financial year 2015 was defined, from an operational point of view, by the entry into operation of the four servicers to which Sareb entrusted the management of its assets at the end of 2014: Altamira Asset Management, Haya Real Estate, Servihabitat and Solvia.

During the year, a complex technological migration process was completed between the former originating entities and the four new partners, which resulted in the transfer of 4 million documents and more than 350,000 keys, linked to 105,000 properties, 80,000 loans and 375,000 guarantees.

As expected, the gradual migration process led to a temporary slow down in the rate of property sales compared with the previous year. As such, the company’s total turnover decreased by 26% to €3,886 million. (…).

For the Chairman of Sareb, Jaime Echegoyen, “in 2015, the company had to deal with the combined effect of the change in the accounting framework and the complex and laborious asset migration process. Both circumstances impacted our income statement and forced us to refocus our strategy for approaching the market over the next few years. The new regulations demand greater efforts in terms of capital management, margins and provisions relating to divestments”.

Original story: El Día

Translation: Carmel Drake

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