2 July 2018 – El Confidencial
The bad bank is continuing to generate problems for the Spanish financial sector. Both for the State, due to the stake held by the Spanish Fund for Orderly Banking Restructuring (FROB), and for the large banks, which own 55% of the entity’s share capital. In this way, the deterioration of the Company for the Management of Assets Proceeding from the Bank Restructuring (Sareb) is going to have repercussions for the banks, which will need to recognise additional provisions worth €402 million.
Specifically, the company chaired by Jaime Echegoyen (pictured above) has updated its business model to reflect forecast losses of 73% of the initial investment, which amounted to €4.8 billion in 2012 split between share capital (€1.2 billion) and subordinated debt (€3.6 billion). “It has performed a reality check, so now we know the figures that we have to stick to”, said one banking executive.
The entities most affected by these revised forecasts are Santander, following its incorporation of Popular, which now owns 22.22% of Sareb; CaixaBank with 12.24%; and Sabadell with 6.61%. Nevertheless, “the impact ought to be very limited, given that “the banks already have provisions to cover the majority of those losses”, explains Nuria Álvarez, analyst at Renta 4, in a note from the bank analysing Sareb’s revised business plan.
Banco Santander has a €1.07 billion exposure to Sareb, although it has now provisioned 50% of that figure, and so it needs additional provisions amounting to €246 million, according to calculations by JP Morgan. The analysts reduce the impact to less than 2% of the profits of the group chaired by Ana Botín.
Impact for Sabadell
The other entity that stands out in this sense is Sabadell, which, according to the US bank, has an exposure amounting to €323 million with current provisioning levels covering 29%, divided between €228 million in share capital and €95 million in subordinated debt. Therefore, according to these calculations, Banco Sabadell needs to recognise additional provisions amounting to €142 million.
The third bank with provisioning needs is CaixaBank, on the basis of these estimates, although they are somewhat residual. The bank chaired by Jordi Gual has an exposure amounting to €593 million, but with a 70% provision, meaning that its shortfall amounts to just €18 million. Meanwhile, Bankinter and Bankia do not have any provisioning needs, according to JP Morgan, and BBVA did not participate in the creation of Sareb.
The bad bank was created in 2012 to assist with the digestion of toxic property in the financial sector. Under the then presidency of Belén Romana, who has recently joined Santander’s Board ahead of the upcoming departure of Rodrigo Echenique, the entity promised profits to the banks to attract capital. The deadline for the completion of Sareb’s work is 2027, the year for which the revised business plan forecasts losses with respect to the initial investment.
Original story: El Confidencial (by Óscar Giménez)
Translation: Carmel Drake