Tag: Fitch

Fitch Confirms The Credit Recovery In Spain

23 April 2015 – Expansión

Over the last month, Fitch Ratings has revised upwards its growth prospects for Spain in 2015 and 2016, to 2% and 2.3%, respectively. In this context of recovery, the agency notes that “new credit growth has been more robust during the first quarter of 2015” and it expects this trend to continue for the rest of the year. Although, the pace will depend on “the strength of the economic recovery and consumer confidence”. “The banks’ healthier balance sheets and initiatives being taken by the ECB to improve liquidity, including the TLTRO (long-term auctions) should support this increased lending”.

Fitch makes these reflections upon publication of its Fitch Spanish Fundamentals index, which analyses changes in the fundamentals of credit, taking into account the key indicators of the Spanish economy: the evolution of mortgages, SMEs and securitisations, the expected EBITDA (gross operating profit) and capital expenditure (capex) of companies, ratings outlook, CDS forecasts, new credit, unemployment prospects and trends in transport. The index ranges from 1 to 10 and Spain is awarded a six, which shows that “its recovery is holding up”.

Unemployment

In terms of unemployment, another one of the key variables that Fitch uses in its new index, the agency forecasts that the rate will amount to 22.5% and 21% in 2015 and 2016, respectively. “This positive trend in employment will support domestic demand. The increase in real disposable income, together with the fall in oil prices, should also drive economic growth”. Nevertheless, in the agency’s opinion, unemployment continues to be too high and, as a counterpoint, it warns that the non-financial corporate sector is continuing to deleverage.

The agency confirmed Spain’s BBB+ rating in October last year with a stable outlook.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Bankia Puts 40 Large Property Loans Up For Sale

7 April 2015 – Expansión

Project Commander / The bank is holding negotiations with opportunistic funds regarding the transfer of real estate loans worth €500 million.

Bankia is causing a storm amongst large overseas funds in 2015. The entity chaired by José Ignacio Goirigolzarri recently announced two large divestments aimed (precisely) at those investors; they are pioneering due to the types of assets that they include: one contains overdue mortgages and the other contains large loans to real estate companies.

In total, Bankia has put unpaid property-related loans up for sale amounting to €1,800 million. Through this strategy, the bank is seeking to reduce its balance of doubtful loans and to continue awarding real estate assets.

The most advanced transaction (in terms of progress) is the one involving the large loans (to real estate companies). Project Commander, the name of the deal being advised by Deloitte, includes 170 loans granted to 39 companies, worth more than €500 million. Of those companies, 31 are property developers and almost all of them have filed for bankruptcy or liquidation, according to sources at the overseas funds. Some of the loans were granted to companies such as the Catalan group Promociones Habitat, the same sources reported.

Exposure to land

Most of the loans are syndicated and bilateral and provide access to a wide range of assets. These include land – €200 million – most of which is rural; and industrial warehouses – €90 million -. The fund(s) that win(s) the bid will also be in a position to take ownership of office buildings, homes, a fully operational aparthotel and even a winery.

Along with the real estate assets, a small portion of the portfolio is backed by pledged shares and other types of economic rights in creditor bankruptcy.

Almost two thirds of the real estate portfolio is located in Castilla-La Mancha – mainly Toledo -, Andalucía and Cataluña.

According to the agreed timetable, the funds must present their final offers within the next two weeks and the transaction should close before the end of the month. Sources close to the process indicate that Bankia may obtain between €150 million and €200 million for Project Commander.

To secure the deal, many of the large funds have purchased real estate platforms during the last two years: Apollo (Altamira), Cerberus (Haya Real Estate), Blackstone (Anticipa), TPG (Servihabitat), Lone Star (Neinor), Centerbridge (Aktua) and Värde Partners-Kennedy Wilson (Aliseda).

These investors have already participated in some of the large real estate loan purchases. Blackstone purchased the largest portfolio ever transferred in Spain to date, Project Hercules, which comprised problematic mortgage loans from Catalunya Banc amounting to almost €6,500 million; and, more recently, Blackstone acquired a non-performing property developer loan portfolio from CaixaBank. Meanwhile, Lone Star purchased a loan portfolio from Eurohypo for €3,500 million.

Nor does the market rule out the emergence of new players such as Pimco, Chenavari and Deutsche Bank.

Meanwhile, yesterday Fitch increased the rating of Bankia’s mortgage bonds by one notch to A-.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

Fitch: House Prices Are Bottoming Out

24 March 2015 – Idealista

…but no rapid rises are expected.

The ratings agency Fitch considers that the decrease in house prices in Spain is coming to an end, but warns that the recovery will be slow. According to the company, one of the main reasons for the improvement in prices is the return of mortgage lending.

Fitch says that Spain faces a slow recovery in the housing market. It considers that prices have practically bottomed out, but rules out any rapid price increases. In fact, it points out that the high level of unemployment, together with the high supply of unsold homes constructed between 2006 and 2007, are two of the factors that will prevent a rapid rebound in prices.

It recalls that house sales increased by 19.6% year-on-year in 2014, according to data published by INE, but that despite that, the number of homes sold amounted to less than half the sales recorded in 2007. The agency expects the number of house sales to increase to move than 400,000 homes this year.

But it also believes that there will be a two-speed recovery. The slowest recovery will be seen in coastal areas and on the outskirts of large cities where there is a larger supply of homes. By contrast, in the centre of large cities, such as Madrid and Barcelona, prices will increase.

Original story: Idealista

Translation: Carmel Drake

Fitch: House Prices In Spain Have Bottomed Out

12 February 2015 – El Mundo

The ratings agency expects prices to stabilise at their current levels, 40% below their peak.

It also predicts that the increase in house prices will be “marked” by the greater availability of credit and a substantial improvement in the labour market.

The credit rating agency Fitch Ratings expects house prices in Spain to stabilise at their current levels, 40% below the peak levels recorded before the crisis. The agency notes that the data now shows that an equilibrium has been reached and prices will not decrease any further.

According to its report about the mortgage market in Spain, the theoretical benefits of greater access to credit are still a long way off from compensating for the over-supply (of homes) and the lack of confidence caused by high unemployment. Similarly, Fitch adds that the increase in house prices will be “marked” by greater availability of credit and a substantial improvement in the labour market.

In this sense, it stresses that interest rates are currently low and that it expects debt servicing to continue to be manageable in the medium term, but it warns that households that are in the process of deleveraging remain sensitive to interest rate rises.

On the other hand, it considers that banks are more willing to grant mortgages to solvent customers and are gradually reducing their margins, as a result of their own lower financing costs. Nevertheless, the low forecast Euribor rates for 2015 will restrict any further decline in these margins.

The agency notes that, according to data from the National Institute of Statistics (el Instituto Nacional de Estadisticas or INE), house prices rose by 0.2% in Spain in the third quarter of 2014, the first time they had risen for two consecutive months since the third quarter of 2007.

Finally, Fitch notes that unemployment decreased by 2.3 percentage points year-on-year in the fourth quarter of 2014, to 24.2% and it believes that the “less bad” conditions in the labour market are reflected in a decrease in the number of loans falling into arrears.

Original story: El Mundo

Translation: Carmel Drake

Fitch: Recovery In Housing Market, But No Rapid Rise In Prices Or Mortgages

15 January 2015 – Expansión

The ratings agency Fitch believes that the downward trend in house prices in Spain is coming to an end after seven years, but that unemployment and the real estate “stock” mean that there will not be a rapid recovery in prices.

Fitch explains that the stabilisation of house prices and of the mortgage market is a reflection of the macroeconomic recovery in Spain and the growing willingness of banks to lend to the most creditworthy customers.

However, despite the efforts made by the European Central Bank (ECB) and the “cheap money” that has been made available to Spanish banks, Fitch does not expect there to be a rapid recovery in the number of mortgages loaned, Efe reported.

According to the ratings agency, the depreciation in the value of foreclosed and sold homes has amounted to 70% in certain cases with respect to their initial valuations.

Similarly, the price range in which banks are selling foreclosed homes has also declined considerably, says Fitch.

Fitch’s analysis suggests that the discounts on forced sales are higher in the coastal regions, such as Andalucía and Cataluña, and that further price cuts are required to find buyers for foreclosed properties and those linked to mortgages signed before the financial crisis.

Nevertheless, although mortgage lending is returning, the high level of unemployment and the housing surplus mean that we should not expect to see a rapid rise in prices.

Furthermore, Fitch points out that 768,000 homes built between 2002 and 2011 remain empty, and that the real estate sector has now bottomed out in terms of prices, as indicated by data published by the National Institute of Statistics (INE), which indicate price increases of 0.8% in the second quarter of the year, the first increase since the outbreak of the crisis.

Original story: Expansión

Translation: Carmel Drake

Fitch: ‘Big As Life’ Signs of Housing Having Bottomed-Out & Prices to Steer Upward Path

19/09/2014 – Expansion

Credit rating agency Fitch looks at the future of the Spanish residential market more optimistically. In its latest update about the sector, the firm‘s analysts  assure ‘there are crystal clear signs that the resi market in Spain has hit the bottom‘ and ‘it is showing traces of stabilization‘.

The report states there exists a ‘possibility of a single-digit rise in prices in the upcoming quarters‘. Meaning that dwellings may go up, though not much. In fact, Fitch indicates the resi properties values graphs ‘have been smoothing over the past four quarters‘.

Moreover, the agency maintains that pricing gaps in different regions start to narrow, albeit the market in some areas will perform better than in the other.

Fitch does not expect any ‘abrupt jump as the lack of adjustment in laboral and property markets are still structural and the correction will take time and effort‘.

On the other hand, the agency estimates that foreclosed properties depreciated by 70% over their first valuations.

The Minister of Economic Affairs, Luis de Guindos, said that construction of homes improved and he was convinced about the return of economic growth. In fact, in the second quarter of the year, contribution of this sector to the national GDP showed first positive result since the beginning of the recession. Moreover, during that period of time, 37.000 people found a job in construction.

Mr. De Guindos believes the policy of the Government will leverage this battered sector up.

 

Original article: Expansión (by Juanma Lamet)

Translation: AURA REE

Fitch Upgrades Spanish Outlook As Recovery Progress Is “Tremendous”

1/07/2014 – Expansion

The credit rating agency Fitch has peeped back into its outlook grade given to Spain for 2014 and 2015 on seeing the “much more rapid growth than predicted” in terms of recovery of the country´s economy that still remains “fragile”. For the two years mentioned above, Fitch raised the forecasts to 1.2% and 1.5% respectively.

In March, the risk estimation company rated the increase of Spain´s Gross Domestic Product (GDP) at 0.7% for 2014 and 1.2% for the following year. Likewise, in the June edition, Fitch claims the Spanish economy will improve 1.5% in 2016.

“Spain stands out in the peripheral Euro Zone as the most vividly recovering country where the unemployment rate dimishes progressively”, explains the agency.

In this context, Fitch points out that in the first quarter of 2014 Spain grew above the European average, by 0.4% quarter-on-quarter. The advance is mostly due to the increase in consumer spending, confidence and job market opportunities which will support a slight climb in the future.

However, the rating firm also draws attention to the 0.6% decline in investment volume in Q1, after two quarters of rise, and the 0.4% depreciation in export. Both phenomena constitute evidence to the “recovery weakness”.

Fitch foresees the investment to go up in the next quarters, bolstered both by national and foreign equity and better lending conditions.

Moreover, the company reckons the exportation will play an important role for growth throught 2014, triggering a minor rise in importation.

When it comes to the job market, in April the unemployment rate kept shrinking and halted at 25.1%, compared with the 25.4% in January and the 26.9% in Q1 2013.

Therefore, Fitch upgraded its outlook for unemployment for both 2014 (from 25.5% to 25%) and 2015 (from 24.5% to 24%). Its first calculation for 2016 sets the rate at 22.5%.

On inflation, the agency decreased the prediction to 0.2% in 2014 and to 0.5% in 2015, while in March it claimed 0.7% and 1% respectively. According to the firm, in 2016 the indicator will post 1%. Thus, it adds the low inflation and high unemployment will dig a “deep hole” in production, despite the increase in the GDP.

 

Original article: Expansión

Translation: AURA REE

Fitch Believes Housing Prices Will Continue to Fall in 2014 & Hit the Bottom in 2015

21/01/2014 – La Informacion

Credit rating agency Fitch claims that the housing prices in Spain will keep falling down due to over-supply, the banks´sales with great discounts and Sareb´s operations, to reach the rock bottom level in 2015, when more favorable conditions will drive demand up. (…).

Moreover, Fitch believes that credit defaulting rate will continue to rise in short-term after the “strong rebound in 2013”, the job market dynamics will stay on weak level and mortgage volume still will be going down. (…).

In reference to the mortgages, the agency foresees meagre access to loans in 2014, caused by economic slowdown and deleveraging in banking sector. (…).

Talking about European performance, the situation on the real estate market improves or at least remains stable, especially in Ireland, Portugal and the United Kingdom. (…).

 

Original article: La Información

Translation: AURA REE

Fitch: there is no real estate recovery, there are bargains.

The credit grading agency Fitch warns that it is still not possible to talk of a recovery of the real estate market. The rise of the foreign investments is due to the big discounts and not to a change in the trend.

“The interest of foreign investors in Spanish real estate properties is seen as a sign of recovery of the market. But we think that the appetite of the foreign investors is due to an opportunistic search for bargains”, the agency points out in its last report on Spain.

To prove this trend, the agency has selected some of the “more relevant transactions” closed with foreign investors, and has validated that the average price per square meter is well below 1000 Euros. “This is more than 40% below the average national price”, it points out.

It could be implied that, in spite of the discounts, the boom of the operations with foreigners has revived the market up to a point of “stabilization”. Fitch does not agree with this, as “the volume of purchases has not reduced until now the excess offer in order to see a real recovery”, as expressed by the report, carried out by the analysts Carlos Masip and Juan David García.

On the other side, the agency points out a remarkable detail: the properties “which have been recovered by the moneylenders have lost, in average, around 71,5% of its original value. This is nearly double the national average: according to the main valuation company, Tinsa, the value of properties accumulates a descent of 39% since the peak of the real estate bubble.

Also, these seized properties are being sold more and more frequently. In the first half of

2013 the securitization funds got rid of 44% of this type of assets, opposite to the 31% of the previous semester, according to Fitch.

Banks are the ones managing the portfolios of properties of these funds. (…)

Those institutions analyzed by Fitch that sold more in the first half of the year were BBVA and CatalunyaCaixa, which also was the one to sell the highest percentage, more than 80% of the total portfolio.

Finally, Fitch stresses that “the average period to sell the seized properties is around 15 months from the seizure date”, a bit less than in 2012, but still a very long period, due to the difficult situation of the real estate market.

 

Source: Expansión