Losses From The Banks’ RE Arms Rose By 11% To €3,266M

14 March 2016 – El Economista

The banks’ real estate arms are still weighing down on the accounts in the sector. Despite the economic recovery and the improvement in prices, the property development companies owned by the financial entities recorded more losses last year than in 2014. Specifically, according to the available data, their combined losses increased by 11% to €3,266 million.

The reasons for this deterioration are the facts that: the volume of assets on their balance sheets is still growing, which means higher provisions, and that divestments are being made at prices that do not even cover management costs and taxes.

Homes and land are still moving onto the balance sheets of the banks at a high rate. In this way, the largest groups (Santander, BBVA, Bankia, CaixaBank, Sabadell and Popular) increased the volume of homes and land they own by 8% in 2015 to €62,163 million, before provisions and valuation adjustments.

In this context, the main owners of these assets are suffering from huge losses and are not forecasting to make any profits until 2017, at least. Everything will depend on the evolution of the economy over the next few months and the recovery of both real estate transactions and prices. In 2015, for the first time since the crisis began, house prices rose.

The real estate company that recorded the highest losses was the property arm of CaixaBank, which is one of the largest. BuildingCenter generated negative results of €1,427 million in 2015, which represented an increase of 11.4% compared with 2014. In the middle of last year, CaixaBank had to inject €1,600 million into its subsidiary to restore its equity. (…).

Although the property developer owned by the Catalan group suffered the greatest losses, the two main property developers owned by Ibercaja saw the highest rises  in their losses. Cerro Murillo and Inmuebles CAI’s losses shot up by 212%, due to the poor performance of the latter, which was inherited from the former Caja3. The losses of both companies amounted to €203 million in total. Ibercaja is trying to accelerate its sales and improve the administration of its real estate assets….to this end, it has sold its home and land management platform to Aktua, in an operation that will generate profits of €70 million for the entity.

Ibercaja was one of the few entities that had not sold its platform. BBVA and Sabadell are the only others that have not sold theirs yet either; they are retaining this administration in-house for the time being.

In fact, BBVA was one of two entities that managed to reduce the losses generated by its real estate arm. The two companies that own its homes and land, which operate under the name Anida, decreased their losses by 22.2%, to €658 million. In part that was due to the fact that the group, chaired by Francisco González managed to sell some of its assets with gains. (…).

The other developer that managed to reduce its losses last year was Liberbank, but its situation is different from those facing other players in the majority of the sector, given that the entity transferred the bulk of its assets to Sareb as part of the financial rescue plan and the properties it inherited from the former CCM are covered by the Deposits Guarantee Fund, up to a maximum of €2,475 million.

Some entities have tried to sell sizeable batches of properties, but these projects have been suspended or delayed due to the political uncertainty in Spain following the general elections and due to the instability in the market due to the slow down in China and the fall in the oil prices.

In this context, the banks will intensify house sales through their branches to individual buyers. One of the most ambitious projects has been proposed by Popular, which seeks to sell homes worth more than €2,800 million in 2016, as part of a plan to get rid of up to €8,000 million non-performing assets, through various means, to improve profitability.

Popular’s real estate arm, Aliseda, increased its losses by 13% in 2015, to €165 million. (…).

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake

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