S&P Encourages Spain’s Banks to Divest More Property & NPLs

18 April 2019 – Ya Encontré

Spain’s banks got rid of €90 billion in foreclosed assets and doubtful loans last year, almost doubling the transaction volume recorded in 2017 (€52 billion) and setting a new annual record. But they still have a lot of homes left to sell and Standard&Poors is encouraging them to divest more of those properties, with a view to restoring their pre-crisis risk levels of 4% within two years.

According to the ratings agency, the banks still hold properties worth €80 billion, representing one of the highest stocks in Europe and accounting for 7% of the balance sheets of the domestic financial sector. In this context, S&P considers that the banks still need to get rid of another €30 billion in assets, at least, if they are to properly clean up their accounts.

The active buyside players in the market include many overseas investors and funds, such as Lone Star, TPG, Apollo, Blackstone, Bain Capital and Cerberus, which have played an important role in reducing the stock of major financial institutions, such as Santander, BBVA, CaixaBank and Banco Sabadell.

S&P is not alone in its stance. Both the European Central Bank (ECB) and the International Monetary Fund (IMF) are also urging Spain’s banks to divest the last of their property portfolios as quickly as possible to ensure financial stability ahead of the next recession.

Original story: Ya Encontré

Translation/Summary: Carmel Drake

Unicaja Puts NPLs Worth €1bn+ Up for Sale Ahead of Merger with Liberbank

8 April 2019 – El Mundo

Unicaja has placed non-performing loans and assets worth more than €1 billion up for sale ahead of its merger with Liberbank, which was launched at the beginning of last year and whose completion is scheduled for the autumn.

The Málaga-based entity, which started 2019 with €3.6 billion in non-performing assets (NPAs) on its balance sheet, wants to clean up 30% of that amount over the next six months.

Meanwhile, Liberbank has carried out several operations in recent years to substantially reduce its volume of NPAs, but still wants to cut the figure of €3.2 billion as at December 2018 by half.

Both entities have actually been in the process of liquidating doubtful loans and foreclosed assets since 2015. But the upcoming merger and need to assign a value to their balance sheets is putting pressure on them to accelerate their respective clean-ups.

Last year, Unicaja divested €995 million in doubtful loans and foreclosed homes, land, garages etc.

Original story: El Mundo (by César Urrutia)

Translation/Summary: Carmel Drake

Bankia Entrusts the Sale of 3 NPL Portfolios Worth c. €1bn to KPMG

3 March 2019 – El Confidencial

Bankia is on course to fulfil one of the objectives of its strategic plan a year early. Two years ago, the entity set itself the target of divesting almost €9 billion from its balance sheet between 2018 and 2020, and last year alone, it sold problem assets worth €6 billion. With the sales forecast for this year, it is set to achieve its goal a year ahead of schedule.

In this context, the entity is launching the sale of three portfolios, worth around €1 billion, with the aim of selling them in the middle of this year.

The largest portfolio, worth around €500 million, comprises doubtful property developer loans; the next, worth around €200 million, contains unsecured debt; and the final one, worth several hundreds of millions, has yet to be defined. All three have been entrusted to KPMG for their sale.

Despite its huge efforts last year, Bankia still has around €8 billion in doubtful loans and €3 billion in foreclosed assets on its balance sheet.

Original story: El Confidencial (by Jorge Zuloaga)

Summary/Translation: Carmel Drake

Spain’s Banks Plan to Sell Real Estate Worth €12.5bn+ over the Next 2 Years

19 November 2018 – El Economista

The banks have set themselves the deadline of 2020 to reduce the property that remains on their balance sheets to an absolute minimum. On the basis of the strategic plans set out by Bankia, Liberbank, Ibercaja and the portfolio of commercial premises put up for sale by Santander, the entities are planning to divest at least €12.5 billion in non-performing assets over the next 24 months.

At this stage, we do not yet know which objectives CaixaBank will set itself in this regard; the entity will unveil its new strategic plan in London on 27 November. Meanwhile, the entity led by Ana Botín has delayed the presentation of its new objectives to the beginning of next year, as it awaits the evolution of the outcome of the elections held in Brazil in October. The exit of the United Kingdom from the European Union, which must take place in March, is also important for the group.

Spain’s entities have accelerated the divestment of their real estate in a frantic fashion over the last 15 months. This summer, Banco Sabadell sold four portfolios of non-performing assets for a combined gross value of €12.2 billion. Those operations allowed the entity to fulfil in one fell swoop the objective that it had set itself in its Strategic Plan 2018-2020 to reduce its non-performing assets by €2 billion per year.

At the end of the third quarter of this year, the entity led by Josep Oliu held €13.62 billion in toxic property left on its balance sheet, nevertheless, once the sales undertaken this summer have been completed, that exposure will be reduced by almost half to €7.67 billion, most of which comprises doubtful loans. The exposure of foreclosed assets has been reduced to around €1.2 billion.

Orderly reduction

With respect to Bankia, in its Strategic Plan to 2020, the entity projected an annual reduction in non-performing assets of €2.9 billion, which would result in the clean-up of €8.7 billion over three years. The bank chaired by José Ignacio Goirigolzarri has divested €2.4 billion during the first three quarters of this year, according to its latest accounts at the end of September, which means that it needs to sell only another €500 million during the final quarter (…).

In the same way, Liberbank closed the third quarter of the year with gross non-performing assets amounting to €3.6 billion, 25% less than it held a year ago. The bank has set itself the objective of leaving €1.7 billion on its balance sheet by the end of 2020, in other words, €1.9 billion less than it currently has.

Finally, Ibercaja, which also unveiled its objectives to 2020 in March, announced its plans to reduce its toxic assets by 50% in three years, which would mean decreasing the balance by around €1.85 billion.

15 months of sales

Santander fired the starting gun on this race with the sale of 50% of Popular’s property to Blackstone, in an operation announced in August last year. Since then, the largest sale by the bank was a portfolio of flats and garages to Cerberus in September, for a purchase price of around €1.535 billion. Thus, the bank still has a second portfolio of foreclosed assets up for sale with a gross value of around €2.4 billion (…).

The most active investment funds to purchase portfolios over the last few months have been Cerberus, Blackstone and Lone Star. Between then three of them, they have made acquisitions of foreclosed assets and doubtful loans from the Spanish banks and Sareb amounting to €48 billion (…).

Original story: El Economista (by Eva Díaz)

Translation: Carmel Drake

Project Olympia: CaixaBank Puts €800M Portfolio of Doubtful SME Loans Up for Sale

23 October 2018 – Voz Pópuli

CaixaBank is pushing ahead with its objective to clean up its toxic property. The Catalan entity is holding negotiations with large international funds to sell the largest portfolio of doubtful SME loans to go on the market to date, amounting to €800 million, according to financial sources consulted by Voz Pópuli.

The deal in question is Project Olympia, which CaixaBank wants to close before the end of the year. It includes loans with real estate guarantees granted to small and medium-sized entities.

This operation joins another that the group led by Gonzalo Gortázar has underway and which is in a more advanced phase, Project Orion, comprising €600 million also in doubtful loans to SMEs with real estate guarantees.

In total, CaixaBank wants to clean up almost €1.5 billion before the end of the year and whereby complete the macro-operation signed with Lone Star to sell almost all of its foreclosed assets for €7 billion. After transferring the homes and land, the only assets left to sell are the problem loans, which is exactly what the entity is doing with Olympia and Orion.

Candidates

Unlike with the sale of the foreclosed assets, the favourites to buy the Olympia portfolio are not large fortunes such as Blackstone, Cerberus, Lone Star and Apollo. In this case, intermediate funds are looking at the operation, such as Axactor, Bain Capital, Intrum and D. E. Shaw. The large funds are saving themselves for other operations underway and to close those already signed during the year.

In the case of Olympia, experts in the market calculate that CaixaBank could obtain around €250 million for this package of loans, whilst the price of Orion could amount to €200 million.

With all of these operations, the Catalan entity is expected to end up with a net exposure (after provisions) to real estate of around €10 billion, down from €20.2 billion at the end of last year.

Beyond the pressure from the ECB to follow this path, the strategy is key for the bank this year due to the closure of its current strategic plan. The lower its exposure to property, the greater the profitability of the entities, which is critical in the current environment.

Original story: Voz Pópuli (Jorge Zuloaga)

Translation: Carmel Drake

Project Orion: CaixaBank Launches the Sale of Another €600M in Doubtful Loans

23 July 2018 – Voz Pópuli

CaixaBank’s divestment machine is not shutting down, even for a second. The entity led by Gonzalo Gortázar has just closed the largest real estate sale in its history, a €12.8 billion portfolio, which it has sold to the fund Lone Star, and it has already launched another new operation.

The latest deal is Project Orion, through which CaixaBank wants to transfer a €600 million portfolio of problem loans to opportunistic funds, according to financial sources consulted by Vozpópuli. Unlike on other occasions, the portfolio does not comprise loans to property developers but rather credits to small- and medium-sized entities (SMEs). The loans are secured by real estate collateral, be it property purchased by the delinquent SMEs or other property offered as collateral when asking for a loan for business activity.

Project Orion was launched a few weeks ago and is expected to be closed after the summer. Currently, interested parties are immersed in the non-binding offer phase.

From flats to loans

The former Caixa is placing this portfolio on the market to reduce its volume of doubtful assets, having eliminated its foreclosed assets from its balance sheet. The entity agreed with Lone Star the sale of €12.8 billion in flats, land and developments for €6.7 billion.

On Friday, CaixaBank presents its results for the first half of the year, which will show the first snapshot of the entity following the agreement with Lone Star.

In addition to that agreement, the entity sold a portfolio of €650 million in problem loans to Cerberus, as part of Project Ágora.

Following those operations, CaixaBank is left with €3 billion in rental homes and €13 billion in doubtful loans on its balance sheet, in net terms.

The market expects the entity to make another major divestment of doubtful loans over the coming months, by selling an even larger portfolio than Project Orion. With that, the Catalan entity would be in a strong position to launch its new strategic plan, which it will announce at the end of the year.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Pressure from the ECB Forces Spain’s Banks to Market €40bn in Problem Real Estate

19 June 2018 – El Mundo

The extension of zero interest rates until “at least” next summer, as announced by the European Central Bank, has led Spain’s financial institutions to conclude that they can wait no longer for an improvement in economic conditions to divest their delinquent loans. At the moment, the main Spanish banks have problem assets worth more than €40 billion up for sale in the wholesale market.

The buyers in this market are large investment funds, which value the assets at prices below their nominal values. For the banks, this difference means, on the one hand, that they definitively loose 100% of the investment that they made and, on the other hand, that they can release the provisions for at least half of those losses. The ECB does not want the entities to speculate with these assets on their balance sheets and for that reason, it is forcing their sale.

In this way, last week, Cajamar liquidated its Galeon Project comprising €308 million in debt and yesterday, it was BBVA who divested another portfolio, called Sintra, comprising €1 billion in property developer loans for finished homes in Andalucía, Madrid, Valencia and Cataluña.

The CEO of BBVA, Carlos Torres, said that with this operation, he considers the chapter of accumulated delinquent debt on its balance sheet as a result of the real estate bubble to be “closed”. Since December 2016, the entity has cut its gross exposure to the real estate sector by approximately €20 billion.

Another entity that has placed portfolios of loans and foreclosed properties on the market is Liberbank, with a €250 million portfolio of foreclosed properties, which it has eloquently baptised Bolt. Other entities that are close to signing agreements include Banco Santander, with €500 million in debt on the verge of being placed and another €400 million on the market, and Banco Sabadell, one of the most active entities in the sale of doubtful assets this year, which is finalising the sale of €900 million in defaulted loans.

The bank headquartered in Alicante has two other large portfolios up for sale, although in that case they are foreclosed properties with a combined value of €8 billion, which proceed from both its own activity, as well as from the activity it took over following the purchase of Caja de Ahorros del Mediterráneo (CAM). If the group chaired by Josep Oliú closes the sale of all of these portfolios, it will have reduced its exposure amounting to more than €14 billion to less than €5 billion.

In the market for the large funds that purchase these assets, there are also offers from CaixaBank (€800 million in defaulted loans in a portfolio called Agora) and Bankia, which is selling €650 million in doubtful loans and preparing another one worth €1 billion.

The largest operation of all is by far the one involving Sareb, called Alfa, which involves placing on the market assets with a nominal value of €30 billion. The public-private company is sounding out the definitive price that the funds would be willing to pay before it decides whether to keep it up for sale.

Original story: El Mundo (by César Urrutia)

Translation: Carmel Drake

Spain’s Banks Race Against the Clock to Sell Off Their Problem RE Assets

28 May 2018 – Eje Prime

The banks are facing a new record. The entities have cut their problem assets almost in half over the last four years, but now they are trying to get rid of thousands of properties in record time to keep the supervisor happy, along with investors. The Bank of Spain warned just this week that the volume of impaired assets continues to be high, given that foreclosed assets amount to €58 billion and doubtful loans still amount to almost €100 billion, something that concerns the ECB and penalises the sector on the stock market.

Specifically, Spanish banks’ problem assets amounted to €152 billion at the end of 2017, a very high volume, but 46% lower than the €280 billion registered as at December 2013.

In addition to the cost that maintaining these assets on the balance sheet has for entities, they also prevent them from allocating resources to other activities more in keeping with the banking sector that would generate higher returns, which worsens the problems of returns in the sector especially at a time of very low interest rates.

In 2017, in the face of clear pressure on the banks to significantly reduce their problem assets, the Spanish market resurfaced to account for approximately 50% of the European market for the sale of problem assets, recall the experts.

The announcement by Cerberus of its purchase of 80% of BBVA’s problem assets and the acquisition by Blackstone of 51% of Aliseda and of Popular’s non-performing assets clearly marked a turning point.

And currently, taking into account the portfolios that are up for sale and the forecasts for the reduction in non-performing assets in the plans of many Spanish banks, a high volume of transactions is also expected in 2018.

The entities are on the case

Sabadell is planning to decrease its non-performing assets by €2 billion per year until 2020, although, depending on investor appetite and the agreements with the Deposit Guarantee Fund (FGD), that figure may rise considerably in 2018, explain sources at Funcas.

Meanwhile, in its strategic plan for 2018-2020, Bankia is forecasting the sale of €2.9 billion problem assets per year, even though the entity got rid of much of its real estate hangover with the creation of Sareb, the bad bank.

The placement on the market of this significant volume of assets is not only limited to the large entities; it is also involving smaller firms such as Ibercaja and Liberbank, which are also planning to divest assets.

In the case of the former, its plans involve cutting its problem assets in half between now and 2020, which translates into a decrease of around €600 million per year, whilst Liberbank is looking at reductions of €900 million per year until 2020.

For 2018, Santander has set itself the objective of €6 billion, whilst Sareb is aiming for €3 billion, which shows the real commitment that the entities have to cleaning up their balance sheets and to keeping the supervisor, and the markets, happy. Now they just need to deliver.

Original story: Eje Prime

Translation: Carmel Drake

Project Makalu: Sabadell Puts €2.5bn Portfolio Up For Sale

21 March 2018 – Vozpópuli

Banco Sabadell is stepping on the accelerator to complete its balance sheet clean up as soon as possible. After months of negotiations with the Deposit Guarantee Fund (FGD), the Catalan entity has decided to place on the market its first large portfolio proceeding from CAM’s Asset Protection Scheme (EPA). In this way, it has distributed information to investors about Project Makalu, comprising €2.5 billion in assets from the former Alicante-based savings bank, according to financial sources consulted by Vozpópuli.

This operation comprises foreclosed assets and unpaid loans from companies and individuals covered by the EPA. It follows another portfolio that has been on the market for a few days, Project Galerna, comprising €900 million in non-performing loans.

KPMG is advising Sabadell on both operations, which together comprise assets and loans worth €3.4 billion.

The group chaired by Josep Oliu has been negotiating with the FGD for months to try to kick-start these operations. The aim is that they will be followed by two more portfolios taking the total value of the assets for sale to €12 billion and whereby reset the entity’s real estate calculator. The issue is not simple because the sale of these loans may generate a hole for the Fund that would impact the State deficit.

Strategic plan

The Catalan entity announced at the recent launch of its strategic plan in London that it maintains the objective of reducing its exposure to problem assets at a rate of €2 billion per year. With the sale of Project Makalu alone it would more than exceed that goal.

The bank held €15.2 billion in problem assets at the end of 2017, but the forecasts indicate that that figure will fall below €9 billion by 2020: €4 billion in doubtful loans and €5 billion in foreclosed assets. And that is without taking into account the divestments that are now being worked on with the FGD.

Project Makalu is the fourth largest portfolio of problem assets ever to be put up for sale by a Spanish bank, behind only Popular’s Project Quasar, amounting to €30 billion, purchased by Blackstone; BBVA’s Project Marina, amounting to €13 billion, acquired by Cerberus; and Project Hercules, amounting to €6.4 billion in mortgages from Catalunya Banc, which was bought by Blackstone.

Meanwhile, Project Galerna is similar to Project Gregal, which Sabadell sold less than a year ago to three funds: Grove, D. E. Shaw and Lindorff. That portfolio comprised loans linked to consumers, without real estate guarantees, which had already been fully written off, and so all of the proceeds from the sale were recorded directly as gains.

Precedents

Besides Gregal, Sabadell closed two other major operations last year: Normandy, comprising €950 million in property developer loans, which was acquired by Oaktree, and which also proceeded from CAM’s EPA; and Voyager, comprising €800 million, which was purchased by the largest pension fund in Canada.

The latest operation launched by Sabadell joins others recently placed on the market by Sareb, BBVA, Cajamar and Kutxabank.

Original story: Vozpópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Axis: Spain’s Banks Have €31.7bn in Toxic Assets Up For Sale

15 March 2018 – Eje Prime

After a 2017 in which one of the key characteristics of the residential market was the interest from funds in going to banks for property, this year, the trend is set to increase. The investment funds are now being joined by Socimis, which want to take advantage of the rapid and generous divestments that the banks are undertaking of their real estate portfolios.

Pressure from the European Central Bank (ECB) for the financial entities to clean up their balance sheets has meant that they have been rushing, for the last year and a half, to sell almost all of their portfolios of assets and non-performing loans relating to the real estate sector. According to data from the consultancy firm Axis, the banks currently have €31.7 billion in toxic assets up for sale.

This large sum of portfolios up for sale is proving to be the subject of major battles between the main investment funds, the majority of which are international, and which in 2017 managed to close record operations in this sense. The sale by Santander of property inherited from Popular to Blackstone for €10 billion, and the agreement reached between BBVA and the fund Cerberus for €4 billion to transfer assets from the real estate firm Anida, fired the starting gun for a race that is going to reach its cruising speed this year, according to Cinco Días.

Spain is the third country in the Eurozone by volume of doubtful loans, with €136 billion and a default rate of 5.7%, a percentage that is above the European average of 5.1%. According to the Bank of Spain, non-performing loans held by the banks at the end of 2016 amounted to €190 billion.

The oligopoly of the servicers 

Axis details that the assets of the banks under the management of the servicers are no longer going to be a question of five, since some of the players may come out of the equation. In 2018, “there will be a greater concentration in the market, with the sale of some of the servicers”, according to the study.

Until now, 80% of the portfolios have been managed by the banks and funds, as demonstrated in the cases of Altamira, which is controlled by Banco Santander; Haya and Anida, companies that are both linked to Cerberus; Anticipa and Aliseda, which are both owned by Blackstone; and Servihabitat and Solvia, which are owned by CaixaBank and Banco Sabadell, respectively.

In addition to the aforementioned funds, Axis adds others with a presence in the Spanish market such as Lone Star, Oaktree, Deutsche Bank and Fortress, which will try to acquire one or more of the portfolios for sale.

Funds and Socimis are going to be searching to generate returns this year, above all, in the rental market, which with yields of 8% “is going to be the product with the most attractive investment prospects”, according to Axis.

Original story: Eje Prime

Translation: Carmel Drake