Cajamar Puts 2,500 Homes Up For Sale With Discounts Of Up To 30%

21 December 2016 – Expansión

Grupo Cooperativo Cajamar has put more than 2,500 properties up for sale, with discounts of up to 30%. The assets are located all over Spain, including in major regional capitals, commuter cities and small towns, according to a press release issued by the entity yesterday.

This offer from the rural saving banks of the Cajamar group will be known as the ‘Christmas Campaign’ and the discounts will apply until 31 January 2017.

The supply includes both urban and coastal properties, as well as new builds and second-hand homes. Most of the properties are located in Andalucía (890) and the Community of Valencia (790), followed by Madrid (260), Murcia (160), Cataluña (140, 60 of which are located in Tarragona) and Castilla y León (140, 110 in Valladolid).

Doubtful debt rate

As at 30 September 2016, Cajamar’s doubtful debt rate stood at 13.77%. At the height of the crisis, it reached 17%, as a result of the entity’s absorption of Ruralcaja, without any public aid, making it the entity with the second highest rate in the sector in Spain. The doubtful debt rate of its property developer business amounted to 79.04%, well above the average for the sector (25%).

The total number of doubtful assets has decreased by 20.4% in the last year, particularly thanks to the sale of a batch of loans worth €328 million. The coverage ratio amounts to 47.62%. The entry of foreclosed assets onto the balance sheet has decreased by 12.61% in the last year and now amounts to €491 million in gross terms. Sales have increased by 35.62% to €257 million.

Cajamar has an agreement with Haya Real Estate to sell its properties to individuals.

Original story: Expansión

Translation: Carmel Drake

Liberbank, Sabadell & Bankia Lead Sales Of Non-Performing Assets

4 November 2016 – Expansión

Significant reductions / the three entities’ doubtful loan and foreclosed real estate asset balances decreased by between 15% and 19% during the first half of the year.

Spain’s banks are beginning to heed the recommendations of the ECB, which has turned the divestment of non-productive assets into its battle horse. To this end, the European banking supervisor has urged those entities with the worst default ratios to present clear and defined strategies for reducing the perimeters of their balance sheets. The body has even advised the entities to link the bonuses of their managers to decreases in non-performing loan balances.

The pace of divestment of these assets, which generate high costs and zero revenues, is picking up speed. A recent report about the banking sector, published by the broker Ahorro Corporación, reveals the names of the leading entities in this regard: Liberbank, Sabadell and Bankia. According to the data compiled between January and June, they decreased their problem assets by 19.2%, 15.7% and 15%, respectively. Not all of the entities supply this information to the market and it is hard to make comparisons between entities. “All of the listed entities reported that negative net inflows of non-performing debt are widespread, although they are all in different stages of the process to normalise the cost of the risk”, explained the firm.

The impact of the Bank of Spain’s new accounting circular, which has just entered into force, is aimed precisely at strengthening provisions against foreclosed properties and plots of land following the burst of the property bubble. It mainly affects Sabadell and Liberbank.

The Bank of Spain’s Financial Stability Report, published yesterday, reveals some success in the sector in this regard. According to its data, doubtful assets in domestic banking businesses decreased by 18.2% between June 2015 and June 2016. The cumulative decrease since December 2013 amounts to 38%.

Despite the dynamism in the real estate market, foreclosed assets (properties handed over to pay off debt, premises, land, etc.) have recently experienced a slow down in the rate of sales. Between 2011 and 2013, the decrease was boosted by bulky sales from Sareb, the bad bank. That entity has now taken over the baton in the segment of portfolio sales.

Overall, the perimeter of non-performing assets decreased by 12% YoY and now amounts to €199,000 million. Refinanced and restructured loans decreased by 12.1% in one year and by 26% since March 2014.

Nevertheless, non-performing assets still account for 15% of Spanish banks’ balance sheets, whereas in the UK and Germany, they account for just 3%, according to a study by AFI. If they were all sold at once, the additional return would allow them to cover the cost of capital, which is what shareholders want the most.

The average ROE of Spain’s banks is 6.1%, according to data from the Bank of Spain as at 30 June 2016. That figure is slightly higher than the European average. Nevertheless, the cost of capital stands at around 8%-9%. (…).

Original story: Expansión (by R. Lander)

Translation: Carmel Drake

Bankinter & Popular – Two Sides Of The Same Coin

8 March 2016 – Expansión

The banks’ default rates  are decreasing and their coverage ratios are increasing. Nevertheless, and although the sector is well provisioned in general, experts point out that not all of the entities are in the same boat.

The long awaited publication of the new Circular by the Bank of Spain regarding provisions, which may now be delayed until September, has brought back to the forefront a topic that Spain’s banks were anxious to leave behind: is the cumulative provision level sufficient?

Most of the experts agree that it is, at least in aggregate – overall, Spain’s banks are well provisioned. But there are important nuances, because not all of the entities are in the same situation and we cannot yet completely rule out one-off surprises, which may require further efforts to strengthen balance sheets. (…).

Individual cases

(…) The experts also note that not all of the banks are the same in terms of their default rates and provisions, something that is clear from looking at the delinquency, coverage and foreclosed asset data as at year end. In terms of loan default rates, Popular and Bankinter represent the two sides of the same coin.

The bank chaired by María Dolores Dancausa continues to be the least delinquent, as it has been throughout the crisis. It closed 2015 with a defalut ratio of 4.13%, less than half the sector average.

The entity has properties amounting to just €531 million on its balance sheet and, moreover, together with Bankia, is the only entity that managed to reduce its cumulative stock during the year. On this basis, analysts agree that the relatively low levels of coverage are adequate for its risk profile.

Meanwhile, Popular finds itself at the other end of the spectrum. Its default rate at the end of the year was the highest of all the listed banks, at 12.86%, and its coverage rate was 42.5%, ten points below the average. The bank chaired by Ángel Ron has property amounting to €14,629 million on the balance sheet, exceeded only by BBVA, which has just devoured CatalunyaBanc’s properties (those that were not transferred to Sareb).

In fact, Popular is the bank that analysts cite when warning about possible exceptions to the relative calm on the subject of provisions. In this way, Nuria Álvarez, a banking analyst at Renta 4 says that “we cannot rule out the fact that some entities will still have to make a significant effort, as may be the case of Popular”. (…).

The economist Carmelo Tajadura shares this view, confirming that “Popular is the weakest of the largest six banks”. This expert says that the bank led by Francisco Gómez has made significant efforts to clean up its balance sheet in recent years, but despite that, it still needs to continuing making provisions, without lowering the pace. Tajadura is certain that “Popular has left the worst behind, but it still has a lot to do”. (…).

Popular is very clear that its priority….is to aggressively reduce the volume of non-productive assets on its balance sheet. The bank has set itself the objective of freeing up at least €4,000 million of these assets this year, although some sources raise that figure to €8,000 million (25% of its total stock).

(…). Besides this forecast reduction, announced in its results, Popular is “working on the possible creation of an SPV to which it would transfer between €4,000 million and €5,000 million of assets and then sell a majority stake in that vehicle to institutional investors”.

Problem entities in the wider market

Beyond the large listed banks, the analysts confirm that there are other entities with more problems, including Abanca…because of the quantity of deferred tax assets it has accumulated…”. Other entities flagged as the weakest when it comes to measuring balance sheet quality are Liberbank, Cajamar and BMN.

Original story: Expansión (by Michela Romani)

Translation: Carmel Drake

Big Banks Record Losses Of €3,600m, Hit By Real Estate

9 February 2015 – El Mundo

The Ibex-listed financial institutions have doubtful balances and a portfolio of foreclosed homes amounting to €120,000 million.

During 2014, they sold more than 20,000 properties for a combined value of €11,700 million.

It will take Spanish banks two more years to “digest” the property binge that they enjoyed during the years of economic boom. The annual accounts of the listed entities – with the exception of Bankia, which has not yet published its results – show that, despite the recovery in the banking sector, the real estate sector continues to be a heavy burden – it generated losses of more than €3,600 million in 2014.

The indicators show signs of optimism, including the decrease in the default rate – which currently stands at 12.75% for the sector as a whole – and the decrease in doubtful assets by more than €20,000 million over the last year. However, the banks recognise that their exposure to the real estate sector will continue to be a hindrance throughout 2015 and 2016 at least, two years during which the market is expected to absorb most of the foreclosed assets (amounting to €60,000 million) accumulated by Santander, BBVA, Caixabank, Bankia, Sabadell, Popular and Bankinter.

The gross credit exposure to developers of these seven entities (all of which are listed on the Ibex) amounted to €103,000 million at the end of last year, although it should be noted that the figure for Bankia relates to the third quarter 2014.

From this quantity, just over €61,000 million is classified as doubtful (i.e. a non-payment of some kind has been recocorded) or sub-standard (credits that are currently being paid, but which are expected to go into arrears). According to the entities, this figure is lower than last year, due to the refinancings, recoveries and maturities that have taken place over the last year. But it is still a volume that requires a significant provision balance to cover the potential losses. Overall, the seven banks analysed recorded a total coverage against doubtful debts of €38,900 million at the end of 2014.

Last year was the first year in which the entities significantly reduced their provision coverage, following five years of crisis. “The results from the real estate sector clearly show the less negative impact that has resulted from the clean up of loans to developers and foreclosed real estate assets” says BBVA, a bank that recorded losses of €876 million in this area. Despite the size of the figure, it is 30% smaller than the €1,252 million losses recorded by the entity a year earlier.

Caixabank is the entity whose results have been hardest hit by the activity in the real estate sector. On 30 January, its CEO, Gonzalo Cortázar, predicted that the housing burden would have an impact on its financial results in 2015 and 2016 that this impact would “still be significant, although the digestion will be prolonged on a decreasing scale.

Santander has managed to reduce its loans to developers by 34% in the last year and has increased its coverage to 54%, but its annual results are still negative, with the entity led by Ana Botín recording a loss of €583 million.

Sabadell’s losses were even greater – €999 million and it has a gross exposure to the real estate market of €26,958 million, the highest in the sector, taking into account the foreclosed assets of CAM.

Fewer discounts

Bankia, Bankinter and Popular do not publish results about their respective real estate businesses. Popular is the bank that holds the greatest number of problem assets (doubtful and foreclosed assets) in proportion to the size of its balance sheet. It has loans amounting to €13,061 million in this category, with a coverage level of 44%. But the figures that really jump out are the volume of foreclosed homes, developments and land (€14,169 million) held by the entity, which closed the year with sales of €1,503 million.

Last year, some entities sold some of their house sale divisions. Altogether, these seven entities offloaded more than 20,000 units for a total value of €11,700 million. Sabadell was the most active bank in terms of house sales, generating €2,744 million. Various sources agree that 2014 was characterised by a reduction in the discounts applied, which in some cases, meant that the income received was actually higher than the recorded book value.

Some entities, such as BBVA and Sabadell, have an Asset Protection Scheme (Esquema de Protección de Activos or EPA) in place, following their acquisitions of Unnim and CAM, respectively. This insurance allows them to cover any additional deteriorations on their balance sheets over the next few years, through the Frob. Sabadell has recognised that it may start to use this financial cushion this year.

With the exception of Bankia, none of these companies has transferred assets to Sareb, the bad bank that absorbed loans to developers, and foreclosed homes and land, from entities that received public aid in the rescue of 2012.

Original story: El Mundo (by Javier G. Gallego)

Translation: Carmel Drake