Tag: cleanup

Banco Popular Records Losses Of €137M In Q1

8 May 2017 – La Vanguardia

Banco Popular recorded losses of €137 million during the first quarter of 2017, its first set of accounts to be published since Emilio Saracho (pictured above) took the helm. And it is clear that he has not escaped from the fallout of the property sector, the evil that tormented his predecessor Ángel Ron. In fact, the loss in Q1 is primarily explained by a €496 million provision against the entity’s real estate portfolio.

Compared to the previous year, the panorama is completely different. During the first quarter of 2016, Popular recorded a profit of €94 million. The need to clean up and strengthen the balance sheet means that the numbers have gone into the red, but the new provisions increase the coverage ratio to 45.2%, with €570 million in non-performing assets and raise the default rate to 51.4%, according to figures published by the entity on Friday.

The bank is going through a difficult time, it registered losses of almost €3,500 million last year. To stay afloat, on Friday, the entity ruled out selling assets “in an indiscriminate way”, given that it will take the decisions that it considers appropriate “always taking into account the value that may be generated for the shareholders”, according to the bank’s CEO, Ignacio Sánchez-Asiaín.

Popular is looking to sell both WiZink and Totalbank if it receives good offers for them and has said that the bank is holding “advanced conversations” for the sale of its non-strategic assets.

Similarly, the director revealed that Project Sunrise, which had been driven by Ron and which sought to place the entity’s real estate assets into a type of bad bank, has been “completely abandoned”. “If we don’t have to recognise any extraordinary provisions, of course, we expect to generate profits this year”, he added.

Popular lost €800 million in deposits in February due to the relevant events that marked the transformation of the entity and reductions in its rating by the credit rating agencies.

Nevertheless, the bank is “succeeding” in recovering deposits and specified that in this sense there is a monthly volatility, which means that Popular is not “worried” by what has happened over the last few months.

The accounts reflect gains of €180 million in the retail business, where the bank specialises in SMEs. The volume of loans granted decreased by 5.6% to €100,859 million, with a default ratio that rose to 14.91%, compared to 12.68% a year before. (…).

Meanwhile, the real estate activity recorded losses of €317 million. Property sales amounted to €459 million, with an 18.5% increase in retail sales, at the same time as the sale of real estate loans reached €402 million.

As the end of the quarter, the capital ratio amounted to 11.91%, above the requirement of 11.375%.

Original story: La Vanguardia

Translation: Carmel Drake

Popular’s RE Losses €992M Higher Than Expected In 2016

2 March 2017 – Expansión

Popular had to find almost €1,000 million more than it had planned in 2016, to cover over-valued loans and properties, and the impairment of its subsidiary, Targobank.

During its last capital increase, Banco Popular announced that it was going to carry out an upwards adjustment to its provisions of around €4,700 million. Nevertheless, the final figure for the definitive provisions amounted to €5,692 million, which led to a negative result (loss) of €3,485 million. The entity, which was chaired by Ángel Ron at the time, has justified the reasons for that €992 million deviation in its total provisions balance in its recently published annual report.

The largest item in terms of provisions not foreseen in the market by the former managers of Banco Popular was “non-recurring provisions for loans and properties”. In total, around €703 million had to be found, in addition to another €54 million in extra provisions to cover other portfolios of loans and properties on the bank’s balance sheet (in this case on a recurring basis).

The other major item in terms of provisions for impairment, which worsened Popular’s numbers by more than expected, related to its subsidiary, Targobank (the bank that it controls jointly with Crédit Mutuel). The significant losses incurred by the entity in 2016 (it recorded a negative result of €71 million) and its failure to comply with the business plan caused the impairment of 100% of the entity’s goodwill balance, which had amounted to €169 million.

Finally, the bank acknowledges that it also had to add another €66 million to its provision balance in 2016 (and post 100% of the corresponding entry in the income statement for the year) in relation to “pensions, restructuring costs and other items”.

In addition to the unforeseen provision-related items, Banco Popular says in its annual report that the high level of provisions recorded in 2016 is due “to a large extent” to the clean-up procedures that were carried out as a result of the new accounting circular 4/2016, issued by the Bank of Spain, known in the sector as Annex IX, which came into force last autumn.

The majority of the clean-up effort focused on the property portfolio, as well as on loans to sectors linked to real estate. According to information presented in the entity’s accounts, this adjustment translated into an impairment in the value of the real estate assets (in other words, provisions) of around €4,025 million last year. The remaining €1,666 million of the new provisions for bad debts were allocated to cover impairments in the bank’s main business. (…).

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake