Sareb’s Board To Meet Today To Review Its Annual Accounts

28 January 2015 – Expansión

The meeting of Sareb’s supervisory body will be chaired by Jaime Echegoyen for the first time today. He is expected to explain the key aspects of the company’s  strategy for the year ahead

Jaime Echegoyen will chair the meeting of Sareb’s Board of Directors today following his appointment to replace Belén Romana at the helm. The meeting has been in the diary for a while, since it is an ordinary meeting, and one of the items on the agenda is the review of last year’s annual accounts, which cannot be closed yet, in the absence of the official Accounting Circular. The Circular should establish, amongst other things, the review criteria for the valuation of the bad bank’s assets and the provision requirement for the possible impairment of the company’s balance sheet. Prior to the Board meeting, the Audit Committee and Appointments Committee will both hold meetings, as always.

The members of the Board will conduct a preliminary analysis of the year end accounts, although the company has until 31 March to approve them. Sources close to Sareb indicate that the company’s activity during the course of 2014 met with the objectives set out in its strategic plan, thanks mainly to a boost in sales to individuals, but also due to the sale of a few property portfolios to large investors, especially during the latter part of the year. As a result, the company’s gross operating profit (EBITDA) was significant. During the first half of the year, Sareb recorded EBITDA of €429 million.

The problem with finalising the accounts at the profit/loss level is that the criteria for the provisions to be applied is not yet known and since the State Council has not yet ruled on the Circular, it is not known whether the Bank of Spain will again impose the requirement to provide for a specific portfolio of assets, as a preventative measure.

In 2013, it ruled that the portfolio of participatory credits should be cleaned up, which resulted in Sareb recording a loss of €269 million.

The new Chairman is expected to share his views about certain key issues with the Board, including whether he will appoint a new CEO or return to the initial structure of an Executive Chairman and one (or more) Director Generals. It seems, at least initially, that he will opt for the former option. He is also expected to inform the Board about the progress of the transfer of information about the assets that new managers will administer going forwards. Currently, there is a transitional regime in place, whereby the ceding companies continue to manage the assets.

Furthermore, Echegoyen must decide whether Sareb will continue to focus on individual sales, as it has done to date, which generate more revenue, or whether it will focus on the sale of portfolios (something that was mainly done at the end of last year to balance the budget) in order to accelerate divestments during the course of the year. All of this will form part of the strategic plan to be developed.

Original story: Expansión (by S. Arancibia and J.Zuloaga)

Translation: Carmel Drake