Tag: early retirement

Deutsche Bank Lost €68M On Operation Tag

8 May 2017 – Voz Pópuli

Deutsche Bank España recorded losses of €68 million on so-called Operation Tag, which was agreed last October, and which involved the sale of a portfolio of non-performing loans and real estate assets to the fund Oaktree for €430 million. And, the negative result from that operation drastically reduced the entity’s profit last year, which fell from €91.4 million in 2015 to €5.7 million in 2016.

The operation involved the sale of a loan portfolio that contained “a series of loans that had already been recognised as non-performing”, as well as foreclosed assets. The bank acknowledges in its most recent annual financial report that the sale “had a negative impact of €68.1 million on the entity’s income statement”. Of that amount, €40.4 million corresponded to the sale of the loan portfolio and €4.7 million to the sale of the foreclosed properties.

Part of the agreed sale of the properties was signed during the first quarter of 2017. They included assets located in Cataluña, which had a gross value on the group’s books of €7 million and which ended up being sold for €4.4 million. The other real estate assets had a book value of €29 million but their sales price was much lower, €8.1 million.

Operation Tag also had an additional cost of €23 million for Deutsche Bank España. The costs arising from the sale amounted to €8.1 million and those relating to adapting the workforce to the new structure amounted to €14.9 million.

Early retirement

In 2016, Deutsche Bank España processed the early retirement of 108 employees, compared with 24 early retirees in 2015. The entity explains in its latest accounts that the amount of pensions caused, €155 million, corresponds to commitments for pensions caused with the retiring and early-retiring employees and that those commitments are “insured or provisioned by an internal fund”. Last year, the bank recognised a provision of €13.9 million for early retirees.

In March, Deutsche Bank announced its plans to sell its retail business in Spain. The entity currently serves more than 700,00 clients in the country and employs almost 2,600 people in its retail division.

Original story: Voz Pópuli (by Alberto Ortín)

Translation: Carmel Drake

BBVA Reorganises Its RE Team To Accelerate Divestments

27 December 2016 – Vozpópuli

BBVA is reorganising its real estate management team to accelerate the divestment of its property portfolio. The entity chaired by Francisco González has agreed to the early retirement of Agustín Vidal-Aragón (pictured above), the Director who has been responsible for Anida and BBVA Real Estate since 2014. His departure, at 55 years old, comes at a time when the bank wants to shake up its business and make the real estate hangover disappear from its balance sheet as soon as possible, according to financial sources consulted by Vozpópuli. Sources at the bank declined to comment.

Javier Rodrígeuz Soler, Director of Strategy and M&A will take over the reins. He is one of the directors who has gained the most influence in the bank’s organisational chart in recent times. He reports directly into González and comes from McKinsey, like the bank’s number two in charge, Carlos Torres.

Over the last few years, Vidal-Aragón had held several different roles in BBVA, incuding Director of Pensions and Insurance in Latin America and Regional Director in Andalucía, before he was appointed Head of Real Estate in May 2014. At the time he replaced Antonio Bejar, who moved to take over the reins at Operación Chamartín.

Sources in the market consider that BBVA has fallen behind its competitors in terms of divesting its real estate portfolio under Vidal-Aragón’s mandate. According to the most recent publicly available figures, the bank still has more than €22,000 million in real estate exposure in Spain, one of the largest balances in the sector.

Rodríguez Soler is expected to place much greater emphasis on the sale of large real estate packages through the wholesale markets, aimed at large international funds. One example of this is the operation that the bank put on the market two months ago: Project Buffalo, through which it is seeking to remove 4,000 homes from its balance sheet.

Another strategic turn is linked to a change in philosophy. Until now, the culture at BBVA was to preserve the maximum value of its properties on the balance sheet, rejecting offers even if they equated to book value. From now on, they will think about property as an inheritance that they need to get rid of as soon as possible and at the best possible price, in that order in terms of priorities.

New team

Rodríguz Soler has created a team of his own to handle this challenge. The following people will report directly into him: Juan de Ortueta (Foreclosed assets), Juan Pedro del Castillo (Financing) and Ana Fernández Manrique (Strategy and Finance). In addition, he has recruited Pedro Egea from the Secretary General’s team, who will take care of all of the administration and control aspects of the real estate business.

Another change is that Cesáreo Rey, Head of Investments, will report into Rodríguez Soler’s area. He will do so directly to one of his trusted executives, José Ferrís. On balance, the new strategy seeks to get rid of the old inheritance.

Original story: Vozpópuli (by Jorge Zuloaga)

Translation: Carmel Drake

Popular Stakes Its Future On The Segregation Of Its RE Arm

4 November 2016 – Expansión

Banco Popular is in the eye of the storm. The bank’s senior officials are facing the future by effectively placing a firewall between the entity’s normal banking activity and its real estate risk, however, the markets do not seem to be able to trust that they will succeed in finding their way out of the tunnel the entity entered when the real estate bubble was about to burst.

Following two major capital increases, amounting to €2,500 million each, and a third, smaller, capital injection of €450 million, as a result of which a Mexican investment group, led by the Del Valle family, became a shareholder of the group, the value of the bank (based on its share price) currently amounts to less than €4,000 million, making it the domestic financial entity that has seen its market capitalisation decreased by the most this year.

Popular has two lives: one afforded by its traditional business, which focuses on rendering financial services to individuals, self-employed people and SMEs, and where its efficiency and profitability ratios are high; and the other one, linked to the real estate sector, where the cumulative losses due to the impairment of its assets represent a real threat to the rest of its activity. (…).

Although the bank has received several offers to join a larger and more powerful financial group, the Board of Directors and the main shareholders who serve on the Board have categorically rejected them all, preferring instead to continue to lead the entity along its own path. “We do not want Popular’s intrinsic value to benefit others”, the entity has said time and time again, in order to justify its negativity towards a corporate operation in which it would fail to take over the reins. (…).

The two capital increases (the first one was carried out in December 2012 and the second one at the start of the summer) were accompanied by the appointment of Francisco Gómez (a man who has worked at the bank for his entire life) as the CEO (in the case of the first) and by his replacement by Pedro Larena, previously from Deutsche Bank and Banesto (in the case of the second). The aim was the same in both cases: to try to convince the market each time that the change in management was going to effectively deal with the recurrent problems, in other words, to eliminate the real estate risk.

Popular has tried to resolve its problems in the traditional way…by selling off its damaged assets at significant discounts, offset by growing provisions…but this has not proved sufficient, not least because the entry of damaged assets onto the balance sheet has been higher than the volume it has managed to sell through individual sales. (…).

Now, Popular is pursuing a strategy to segregate a substantial part of the real estate risk that it holds on its balance sheet (€6,000 million in book value), by placing it into a company that it will also endow with sufficient capital (around 20% of its liabilities). This capital will distributed free of charge amongst Popular’s existing shareholders in a way that will completely dissociate the entity from the transfer/sale. (…).

However, even once Popular has managed to eliminate a significant part of its real estate risk, the bank’s problems will not be over. That is reflected in the ERE that it is currently negotiating with the trade unions (which should be finalised by Sunday 6 November at the latest), which proposes the closure of 300 branches and a reduction in personnel of around 1,600 people through early retirement and voluntary redundancy packages. (…).

Original story: Expansión (by Salvador Arancibia)

Translation: Carmel Drake