BBVA Prepares Sale of €1.5bn Property Developer Loan Portfolio

30 November 2017 – Expansión

The property sector / The second largest Spanish bank detects a large appetite from opportunistic funds for the real estate risk it has left over: €4.8 billion, after deconsolidating €13 billion of foreclosed assets.

BBVA is making steady progress to clean up its balance sheet. The entity is preparing the sale of a portfolio of property developer loans with a gross value of between €1.5 billion and €1.6 billion (31% of the total) after deconsolidating the risk associated with its foreclosed assets.

The group’s gross real estate exposure has been reduced to €4.8 billion in the form of property developer loans following the agreement with Cerberus to transfer €13 billion in foreclosed assets to a newly created company. BBVA’s plan is to sell one-third of its property developer loan portfolio to an opportunistic fund.

“It is going to be a very competitive portfolio”, said Javier Rodríguez Soler, Head of Strategy and M&A at BBVA, speaking to Expansión. In parallel to the operation with Cerberus, the bank has identified a large appetite from the big funds, such as Lone Star, Blackstone and Apollo, for loans linked to the property sector. The portfolio comprises finishing buildings, properties under construction and land.

Transfers to its subsidiary

The intention of BBVA is to reduce its risk estate risk to almost zero. The Head of Strategy said that the bank is looking to transfer another €1.5 billion of performing property developer loans to its Spanish subsidiary.

Many banks separated out their real estate businesses to curb the impact of the fallout from the burst of the bubble on their annual accounts. BBVA’s property unit lost €281 million during the 9 months to September this year, down by 10.9% compared to a year ago. Sources at the entity expect the real estate business to stop generating losses in 2018.

Yesterday, BBVA took a giant step to clean up its real estate-related risk. The bank has created a company together with Cerberus to transfer 78,000 properties with a gross value of €13 billion. 47% of the foreclosed assets are located in Cataluña, the historical heartland of Catalunya Caixa (CX) and Unnim, which were both absorbed by BBVA during the crisis. Some of those properties are social housing units, whilst some of those proceeding from Unnim are covered by an Asset Protection Scheme (EPA).

The US fund will own 80% of the new vehicle after paying BBVA €4 billion; the banking entity will own the remaining 20%. Haya Real Estate, Cerberus’s platform in Spain, will manage the portfolio of properties that the bank holds onto. The agreement also involves the transfer of 400 employees from Anida, the real estate arm of BBVA, to the joint company with Cerberus.

Original story: Expansión (by R. Sampedro and R. Lander)

Translation: Carmel Drake

Banks Still Own Problem Assets Amounting To €213,000M

5 May 2016 – Cinco Días

Spain’s banks still have a heavy burden weighing down on them following the burst of the real estate bubble: they now own foreclosed assets worth €84,000 million, taken on since the start of the crisis.

According to the Bank of Spain in its financial stability report, published on Wednesday, that figure “has remained stable since December 2012, always ranging between €75,000 million and €84,000 million”.

Of that amount, 37.6% relates to land, 25% to finished buildings, 22.3% are foreclosed assets resulting from the acquisition of homes, and 5% are buildings under construction.

In the last year, land has decreased by 0.5 points, finished buildings have dropped by 0.43 points, homes have increased by 1.8 points and buildings under construction have remained stable.

But beyond these properties, the banks’ exposure to non-performing assets and problem loans amount to almost €213,000 million in Spain’s financial sector as a holw.

The banks have lots of “non-performing assets on their balance sheets, which do not generate any revenues for the income statement, but which do require financing”, said the financial supervisor, which has published data relating to 2015 year-end.

“A hindrance to solvency”

The Bank of Spain also warns that “although these two indicators have decreased, by 14.5% as a whole, over the last year, they still represent a significant percentage of the total assets of the banks in their business in Spain and they place negative pressure on the income statements of the entities, reducing their profit generation capability and therefore, representing a hindrance to increasing the solvency of the institutions”.

In terms of total loans that have been refinanced or restructured, that balance amounted to €205,000 million at the end of last year, which represents a YoY decrease of 6.4% compared with the end of 2014.

Of the total amount of loans whose initial terms have been adjusted, “51.5% relate to non-financial companies and 46.2% to households”, said the Bank of Spain.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake