8 August 2016 – Expansión
Spain’s banks are still working hard every day on the unenviable task of cleaning up the property on their balance sheets. And that was reflected in their reported sales figures for the first six months of 2016, which increased by 9% compared with 2015. In total, the major Spanish entities (which have now published their results) received proceeds amounting to €4,860 million from the sale of homes and other real estate assets during H1 2016.
This acceleration was also accompanied by another piece of good news for the banks, namely that the improvement in the real estate market is allowing the entities to record profits in many cases.
In terms of the number of real estate units, the figure remained stable during the first half of the year, with around 37,500 assets sold during the first six months, up by 0.9% compared to H1 2015. This reflects the fact that the banks completed the same number of operations, but at higher prices.
This acceleration in real estate sales comes at a time when the banks are concerned about the effect that the accounting changes applied by the Bank of Spain will have. It is hoped that the new legislation – which comes into force in October – will tighten the bolts on the provisions made by entities against foreclosed assets. In fact, some groups recorded large provisions during the first half of the year to reflect the possible impact.
Mismatch of provisions
According to several financial sources, there is a mismatch in the provisions recorded against many of the banks’ foreclosed assets. In this way, the two Royal Decrees proposed by (Luis) de Guidos in 2012 established linear provisions for all of the banks’ properties, but there are significant deviations for homes depending on the region and condition, which are not reflected in their valuations.
In addition, both the Bank of Spain and the European Central Bank (ECB) have indicated on several occasions that the entities have to decrease the weight of non-performing assets on their balance sheets, one of the major impediments against improving yields.
“If we add the doubtful asset balance to the foreclosed asset balance, we arrive at a figure of €213,000 as at December 2015 […]. Although those two numbers decreased by 14.5% in the last year, they still account for a significant percentage of the banks’ assets in Spain and they weigh down negatively on their accounts”, say the Bank of Spain.
Just like last year, Popular was again the entity that recorded the highest revenues from property sales, with 5,227 assets sold for just over €1,000 million. (…). Santander and Sabadell came in close behind Popular, with sales amounting to €994 million and €974 million, respectively. Nevertheless, it is worth mentioning that the figures provided by the entities are not homogenous, given that some include sales by property developers linked to banks as well as sales of other assets such as garages, storerooms, retail premises and land. (…).
CaixaBank was ranked in fourth place, with sales of €610 million. (…). BBVA and Liberbank were the entities that saw the highest increase in property sales. Sales by the former rose by 62% to €323 million and that figure increases to €529 million if we include the sales of assets from its property developers’ balance sheets.
Meanwhile, Liberbank increased its volume of property sales by five times to €89 million, after reconfiguring its real estate arm and assigning more resources to it.
The other entities – primarily groups created from the former savings banks – fall well behind in terms of sales volumes because their balance sheets are smaller, in part because they transferred assets to Sareb. (…).
Original story: Expansión (by J. Zuloaga)
Translation: Carmel Drake