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

Ibercaja Looks At Selling Its Property Platform To A Foreign Investment Fund

11/08/2014 – Expansión

The Basque group is seeking to show the value of the business in order to emerge stronger from of the European stress tests. BMN and Cajamar earned €50 and €225 million, respectively, in similar sales.

Ibercaja Bank is looking toward the market to raise capital. The financial group, which encompasses the assets of Ibercaja and Caja 3, is looking into selling its property platform to a foreign fund. This possible transaction is in addition to the efforts to look for new shareholders, led by JPMorgan, as previously announced by EXPANSIÓN.

According to financial sources, the transaction is an attempt by Ibercaja to emerge stronger from the European stress tests. For the same reason, the bank has boosted its half-year results with the sale of the bulk of its debt portfolio, for a value of €424 million.

The sale of the property business is still in a very initial phase and it will not be until September that the decision will be taken as to whether or not to give the transaction the green light. Nevertheless, Ibercaja has already contracted the investment bank, if necessary, to expedite and complete the sale between October and November. The Aragonese group would make no comment.

In this case, the bank would follow the example of other competitors and would be the eighth Spanish group to sell its real estate business, after Santander, Popular, CaixaBank, Bankia, Catalunya Banc, BMN and Cajamar.

Valuations

According to sources consulted among the foreign investment funds, the sale of Ibercaja’s bricks and mortar platform parallels those of Cajamar, which was sold to Cerberus for €225 million; and that of BMN, for which Centerbridge paid 50 million euros.

The price of this type of transaction is flexible. What is sold is the platform and a management contract lasting ten years. The higher the commission fixed for the period, the more upfront capital is offered by the funds, and vice versa.

Nevertheless, the value of this property business is expected to be less than that of Cajamar, given that Caja 3 transferred a large part of its problematic assets to Sareb last year. In total, it handed over to the company presided by Belén Romana assets valued, after discounts, at 2,212 million.

Besides that, Ibercaja had at the end of 2013 around 3,400 million euros in finance set aside for construction and property development and €1,146 million in foreclosed assets. Caja 3, meanwhile, had 422 million euros in loans to developers and €182 million in foreclosed assets.

Search for shareholders

In parallel with this transaction, in June Ibercaja began the search for foreign investors through JPMorgan. The group is looking to raise up to €300 million in capital, as a first step towards listing on the stock market and ending up with less than 50% of the bank’s share capital, as required by the most recent Savings Bank Act for entities that do not wish to create a reserve fund. According to financial sources, Ibercaja and the investment funds have, for the time being, rather differing viewpoints and the capital increase is not expected to be completed in the short term.

Original article: Expansión (by Jorge Zuloaga)
Translation: Aura REE