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16 November 2016 – Voz Populi
Liberbank’s sole objective right now is to reduce its default rate. The entity led by Manuel Menéndez is working around the clock to try to control its default rate, which will soar from 8.8% to more than 16% on 1 January 2017. For this reason, it has just launched the sale of its first portfolio in the last two years aimed at large investors.
This situation has arisen because the programme of guarantees that it received in exchange for acquiring the state-intervened bank CCM is coming to an end. Until now, none of the problem assets from the Manchegan savings bank have been consolidated into Liberbank’s balance sheet, but they will be from next year.
The entity born out of the mergers between Cajastur, Caja Cantabria and Caja Extremadura, and the purchase of CCM, has put its retail network into full swing to try and sell the maximum number of homes possible. In addition, Liberbank will now focus on the sale of portfolios to large international investors.
The first portfolio to come onto the market is known as Project Fox, containing between €150 million and €200 million in unpaid mortgages, according to financial sources. It is not the first entity to sell loans granted to individuals to buy homes; Bankia and Deutsche Bank España have also done the same recently.
Liberbank will try and close Project Fox before the end of the year, although it would not be a problem if the sale gets pushed back to Q1 2017. That is because the final year end accounts that the entity presents for 2016 as a whole, will still benefit from the cushion of CCM’s asset protection scheme (EPA) to decrease the default rate. The accounts that it publishes in March will be the first to reflect the new situation without the aid.
Several portfolios
At least one or two other portfolios will be put on the market alongside Project Fox over the next few weeks. According to several financial sources, one will contain non-performing loans (to SMEs and consumers) amounting to several hundreds of millions of euros. In total, all of the divestments that the financial group is putting on the market during the final stretch of 2016 will exceed €500 million.
Liberbank’s aim is to stabilise its default rate at less than 15% by the beginning of 2017. The entity has not ruled out participating in a major operation next year, to allow it to return to normality in terms of its doubtful and foreclosed assets, primarily by getting rid of its properties in Castilla-La Mancha.
The pressure on the entity is growing, given that both the Bank of Spain and the European Central Bank (ECB) are focusing on provisions, in the face of the new domestic accounting circular and the entry into force in 2018 of new international regulations, which will change the rules of the game.
These are not the first portfolio sales undertaken by Liberbank. It sold a non-performing portfolio to Cerberus in 2013 and another non-performing portfolio to JB Capital Markets in 2015. In addition, it negotiated the sale of its doubtful debt recovery platform to Lindorff and Cerberus in 2014, although the operation did not go ahead in the end after it failed to get approved by the Board of Directors.
Original story: Voz Populi (by Jorge Zuloaga)
Translation: Carmel Drake
