Unicaja Considers the Sale of a Large RE Portfolio in 2019

12 February 2019 – Expansión

Unicaja accelerated the clean up of its balance sheet during the course of 2018. The Málaga-based entity decreased its volume of non-performing assets by 22%, in such a way that it is now close to the reduction objective it established in its latest strategic plan for 2020. That is according to the figures provided by the bank itself during the presentation of its results for last year.

The entity chaired by Manuel Azuaga (pictured above) ended 2018 with a volume of non-performing assets (NPAs) amounting to €3.6 billion, of which €1.7 billion were foreclosed assets and €1.9 billion were non-performing loans.

In five years, the bank has reduced its toxic legacy by 51% or more than €3.8 billion. Unicaja’s commitment to investors was to bring its exposure to problem assets down below the €3.5 billion mark before the end of 2020. The rate of sales of small NPA portfolios has allowed it to get ahead in the calendar that it established in its strategic plan. But the entity will continue its clean up.

The heads of Unicaja have reported their intention to continue with small portfolio sales during 2019. Moreover, they do not rule out carrying out the sale of a large portfolio in order to segregate a majority of the non-performing exposure, in a similar way to what most of the Spanish banks have been doing over the last two years.

Unicaja’s decision to carry out a massive property sale will depend, like in other cases, on the discounts that the entity will have to apply to its portfolio. The NPAs of the Malagan bank have an average coverage level of 57%, which means that a discount of a similar percentage could be applied to the book value without resulting in accounting losses for the entity this year.

High asset quality

Unicaja is, together with Abanca, the only Spanish bank entity that still retains ownership of its servicer, the real estate subsidiary through which it sells its homes and commercial premises.

The recent decision by Sabadell to sell 80% of Solvia to Intrum followed other previous operations that have seen the Spanish banks undoing their positions in the property segment, including the sale of Servihabitat to Lone Star by CaixaBank, and of Aliseda to Blackstone by Santander.

Beyond Unicaja’s plans for its property, the entity has been recording a positive trend in terms of the quality of its assets for several years now. The net inflows of problem loans have registered eight consecutive quarters of decreases, and between September and December, they recorded the largest decrease in the bank’s historical series.

Since 2014, Unicaja’s default ratio has also decreased by almost half: from 12.6% recorded in December 2014, the Málaga-based entity has managed to clean up its balance sheet to bring the rate of toxic loans down to just 6.7%.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Bankia Analyses Block Sale Of Entire Real Estate Portfolio

7 November 2017 – El Economista

Spain’s banks do not want to pass up the opportunity that currently exists in the market to get rid of their toxic assets linked to the real estate sector as quickly as possible. Funds’ interest in acquiring properties and problem loans continues at the same level as during the summer, when Santander reached an agreement to transfer almost all of Popular’s real estate portfolio, worth €30,000 million in gross terms, to Blackstone.

BBVA announced a few weeks ago that it is negotiating with Cerberus to close a similar operation, although it did not share any details about the perimeter in that case. And now, it is Bankia’s turn to tread the same path and resume Project Big Bang to a certain extent, after it was suspended two years ago. The nationalised entity is currently analysing putting up for sale all of the real estate assets that it still holds on its balance sheet. The transaction would include the assets it inherits from BMN once both groups have merged at the end of this year.

This is one of the “strategic priorities” for the next few months, said Bankia’s CEO, José Sevilla, speaking recently at a press conference with analysts. He assured his audience that investors have an appetite for this type of large portfolio at the moment, unlike two years ago.

Just over €6,000 million of assets

The volume of the operation, if it goes ahead, in the end, will be significantly smaller than the deal closed by Santander, given that both Bankia and BMN have fewer foreclosed assets and doubtful debts. A significant part of their balances was transferred to Sareb in 2012 and 2013, under the framework of the bank rescue. Once the group chaired by José Ignacio Goirigolzarri has absorbed the Levante-based entity, it will have around €6,300 million in loans to property developers and foreclosed assets in total, a third of all the non-profitable assets – which include doubtful loans granted to other sectors.

Specifically, Bankia has €3,150 million in properties, with a coverage ratio of 34%, whilst BMN has €1,470 million, with provisions covering 28% of its risk. In terms of financing to property developers, the volume managed by Bankia amounts to almost €1,100 million and the amount handled by the bank led by Carlos Egea amounts to approximately €600 million.

Commercial focus on companies with a service platform

Between now and the end of the year, Bankia is going to place its commercial focus on the business segment, for which it has created a platform for services that complement financing. According to the director of this business, Gonzalo Alcubilla, access to loans is no longer a concern for companies and so now, they are asking about how to enter new markets and secure new clients to increase their turnover.

In fact, Bankia currently rejects fewer than 10% of the loan requests its receives. In this context, it has created “Soluciona Empresas”, a pack of free digital tools that helps businesses take management decisions, such as advice regarding exporting overseas. The platform may be used both by companies that are clients of the entity as well as by those that are not, according to Alcubilla speaking on Monday at the presentation of the instrument. The tools are grouped together for three purposes: to sell more, manage risks and obtain resources.

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake

The ECB Demands Higher Provisions For Doubtful Debts From 2018

10 October 2017 – Cinco Días

The ECB has proposed a tightening of the provisions required by banks for any loans that they classify as doubtful from 1 January onwards. The ECB has subjected the draft legislation, currently posted on the body’s website, to public consultation. The standards that the supervisor is preparing complement those published in March of this year. In this way, banks will have to set aside more money from 2018 onwards to cover 100% of the loans that they reclassify, in other words, those that go from being standard to doubtful. The ECB will establish different terms depending on the type of loan: those that are secured by a real estate asset may be provisioned at 100% over seven years from the date of their reclassification. For loans without any type of guarantee, entities will have just two years to constitute the 100% provision.

The provisions will be applied on a linear basis from the date of recognition of the doubtful debt until the date the coverage ratio equals 100%, but national supervisors may require the recognition of provisions more quickly in certain cases. Moreover, loans that are partially covered by real estate assets must be provisions in two parts and with two doubtful rates.

In March, the ECB published a handbook for doubtful loans to be applied to portfolios of doubtful loans already in existence. It demanded that entities undertake procedures to reduce this load that, in its opinion, is restricting banks’ ability to grant new loans. The handbook is not binding, but banks will either have to “comply or explain”. In other words, they will have to comply with the handbook or explain why they are not complying with it. It also requires that they set specific objectives to reduce their existing portfolios.

Based on the response from entities and the evolution of doubtful balances, the supervisor will present new proposals,at the end of the first quarter of 2018, to attack the excess volume of toxic loans in the banking sector. According to the supervisor, the so-called “significant entities” (almost all of the banking system in Spain and 130 in total in Europe) held €865,000 million in doubtful assets during the first quarter (after that balance decreased by almost €100,000 million in one year). “Many entities have made significant progress and have submitted credible strategies that include reduction plans, but others still have a way to go to improve”, said the ECB.

In March, doubtful loans accounted for 47.05% of the total bank loan book in Greece, 17.75% in Ireland, 19.82% in Portugal and Italy. Based on this criteria, the figure for Spain amounted to 5.86%, but its level of foreclosed assets was very high.

Original story: Cinco Días (by Nuño Rodrigo Palacios)

Translation: Carmel Drake

Cerberus Wants To Buy Anida & A €4,000M Portfolio From BBVA

29 September 2017 – Expansión

BBVA is taking new steps to deconsolidate its real estate risk. The entity is holding exclusive negotiations with the US fund Cerberus to sell it a majority stake in its real estate manager, Anida.

Financial sources explain that the fund may also be interested in acquiring around €4,000 million in foreclosed assets and doubtful real estate loans from the bank.

BBVA’s real estate activity, which centres around Anida, comprises two branches. On the one hand, the manager is in charge of administration. On the other hand, it is responsible for the real estate assets, be they foreclosed properties or loans to property developers. BBVA’s gross exposure to property amounts to €20,190 million, according to the latest available data. The entity has a coverage level of 57%, which reduces its net risk in terms of the real estate sector to €8,760 million.

In a relevant fact sent to Spain’s National Securities Market Commission (CNMV), BBVA reported that it is holding conversations with Cerberus (…). “At this time, it is not possible to determine whether the conversations will end in an agreement or not, or what the terms and conditions of such an agreement, were it to be reached, might be”, said the bank.

Similar to Santander

According to sources, the intention of Cerberus is to acquire a majority stake in the real estate company, similar to the agreement that Santander reached with Blackstone to deconsolidate the real estate risk of Popular. Hours after Brussels authorised the purchase of until then the sixth largest Spanish bank by assets, Santander sold Blackstone a 51% stake in the company to offload its problem assets with a gross value of €30,000 million. That was the largest ever real estate operation in Spain.

If the negotiations with Cerberus prove fruitful, BBVA would follow the template established by Santander. Some sources indicate that Cerberus has decided to try its hardest to buy Anida after not making it past the first round in the bid for Popular’s toxic real estate. In fact, the same sources say that the CEO of Cerberus, John Snow, travelled to Madrid a few weeks ago to meet with BBVA’s President, Francisco González.

Negotiations

The negotiations, with Cerberus as the only interlocutor, are very advanced, say sources in the sector. It is expected that the sale of the majority stake in Anida and of property by BBVA could be completed within the next few weeks.

BBVA is being advised by the law firm Clifford Chance and by a team from the consultancy firm PwC. Meanwhile, Linklaters is advising the US fund, which has also hired JLL for the negotiations.

BBVA is one of a handful of banks that have retained full control over their real estate businesses. During the crisis, several entities sold their management companies to specialist funds to generate profits with which to strengthen their businesses and accelerate the divestment of problem assets. Only Kutxabank (to Lone Star) and Santander (with the transfer of Popular’s business to Blackstone) have managed to close block sales of their management arms and asset portfolios.

Original story: Expansión (by R. Ruiz & R. Sampedro)

Translation: Carmel Drake