Sareb’s Financing Costs Will Be €400m Lower In 2015

19 February 2015 – Expansión

Good news for Sareb. The company has not yet published its accounts for 2014, since it is still waiting for the Bank of Spain to define its accounting framework and whereby determine its final results. But the company, chaired by Jaime Echegoyen (pictured), has taken an important step that will help to improve its results in 2015, its third year of operation.

The bad bank has just renewed the debt that it raised to pay the rescued savings banks for the properties and developer loans that they transferred. Instead of cash, Bankia, Novagalicia (now Abanca), Catalunya Banc, Banco de Valencia, BMN, Liberbank, Banco Caja Tres and Ceiss received senior bonds backed by the State.

The bonds, whose interest rate is linked to 3-month Euribor and the spread on Spanish debt, had maturity dates of one, two and three years and are renewed automatically. The debt relating to the entities classified in the so-called Group 1 (the larger ones) was renewed in December and now (in February) it has been the turn of the Group 2 entities.

Thanks to improved market conditions, in particular, the decrease in the risk premium on Spanish treasury bonds, Sareb has significantly reduced the yield on these senior bonds to the extent that the average spread on its debt portfolio has fallen from 1.954% to 0.832%.

In this way, Sareb will reduce its financing costs by €400 million in 2015, according to the institution’s official calculations. In other words, with the renewal of this debt, the former savings banks will no longer receive this amount for the real estate assets they transferred to the bad bank, which will have a negative impact on their net interest income this year.

The decrease in the interest payments on this debt would have been even greater without the coverage that Sareb contracted over 85% of the portfolio through a swap, which establishes a fixed interest rate regardless of the evolution of Euribor. In this way, it protects its results from upwards movements in the base rate, but it also mitigates the positive effects of any downwards movements.

Repayment of €5,416 million

Sareb’s financing costs have also been reduced by the repayment of debt. The bad bank issued €50,781 million in bonds when it was created to pay the savings banks for their assets. Since then, thanks to the income generated from the sale of properties and loans, it has repaid €5,416 million of that balance.

The amount of debt repaid in 2014 exceeded the initial expectations of €3,000 million by more than €400 million. And Sareb expects that it will exceed its bond repayment forecasts this year as well, although it has not yet shared these forecasts with the market.

“Sareb is fulfilling its main objective, which is to manage and sell its portfolio of assets without generating higher costs for the taxpayer”, said the Chairman of the bad bank in the first ordinary meeting held by the Board of Directors in 2015.

His predecessor in the role, Belén Romana, used to repeat the mantra that reducing its own financing costs was one of Sareb’s priorities to pave the way towards sustainable profitability. Its financing costs amounted to €1,272 million in 2013 and decreased to €1,135 million in 2014. In all likelihood, this downwards trend will only accelerate from here on in.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

Best Mortgages Before The End Of 2014

29/12/2014 – Expansión

The last few days leading up to the end of 2014 have been filled with the habitual summaries, assessments and balance sheets.

As far as the mortgage market is concerned, over the past 12 months there has been a reduction in differentials that banks add to the Euribor, a reference rate that is added to most adjustable-rate mortgages signed in Spain, which has registered record lows.

These factors have resulted in a higher number of mortgages signed from June to October this year, the last month for which the National Statistics Institute (INE) has released data. The number has exceeded those of the same month back in 2013.

In October, 17,687 mortgages were signed, 18.0% more than a year ago. In September, 19,323 or 29.8% more than in the same month of 2013; in August – 15,040 (23.8% increase); in July – 18,107 (up 28.8%), and in June – 17,137 (19.0% more).

But let’s look over this bit by bit. The average overall differential of banks at the beginning of the year was at 2.788%, according to Bankimia indices calculator, whereas just a few days short of the end of the month, it has dropped to 2.136%. The reason behind this decline is the appearance of new mortgages in 2014 and interest rate reduction in some of the already existing ones.

And according to forecasts, the path of the mortgage for next year will be similar, with steady reductions in differentials.

At the end of November, the Euribor was at 0.335%, as confirmed by the Bank of Spain. This is the lowest level in history and the result of monetary measures taken during the past year by the European Central Bank, with reductions in interest rates, reaching all the way down to 0.05%.

As December comes to a close, the ten most outstanding bank mortgages, according to Bankimia mortgage comparison website, are the following:

1. CajaSur Mortgage, from CajaSur: It starts with a fixed interest rate of 2.50% during the first two years and then Euribor +1.25% for the remaining repayment period. To achieve these conditions, the holder must have their payroll deposited directly to the bank and purchase three insurance plans (payment protection, home and life), plus a card and a pension plan. CajaSur finances up to 80% of the appraised value of a first home.

2. Ahora Mortgage, from Liberbank: No sign-up fee, starts with an interest rate of 1.95% for the first 12 months and then the Euribor is applied at +1.50% for the rest of the repayment period. The bank requires the holder to have their payroll deposited directly or have certified income of above 2,000 euros a month, as well as purchase a comprehensive home insurance plan and each loan holder must sign up for a card issued by the bank. This product is marketed throughout the country except for branch offices in Asturias, Extremadura, Cantabria, Castilla-La Mancha, Avila and Lugo.

3. HipoteCasa db Mortgage, from Deutsche Bank: It has a fixed interest that starts at 2.25% for the first 12 months. For the rest of the repayment period, the interest rate is variable and based on Euribor +1.59%. All this is contingent upon whether the appraised value of the property, a first home, to purchase is equal to or greater than 100,000 euros.

In addition, the holder must set up direct payroll deposit and three basic bills to the bank, plus household income must be over 30,000 per year. It is also required to hire both a credit and debit card, plus three insurances: payment protection, home and life.

4. Hogar Mortgage, from Caja de Ingenieros: It finances up to 80% of the lesser value between the purchase or appraisal of the home being bought, which must be that of primary residence. Throughout the first year a fixed interest rate of 2.35% is applied, while for the rest of the period, the Euribor at +1.59%. To obtain these conditions, the holder must set up direct payroll deposit and three debit of three utility bills, have a minimum account balance of $3,000 and purchase three insurance policies (payment protection, home and life) along with a credit card.

5. Postal Mortgage, from BanCorreos: During the first 12 months a fixed interest rate of 2.5 % is applied, while for the rest of the repayment period, a differential of 1.59% is added to the Euribor. It finances up to 80% of the appraised value of the house with a minimum of 80,000 euros. The holder must be linked with the banks through direct payroll deposit and hiring of a home and life insurance, as well as a credit card and a pension plan.

6. Freedom + Mortgage, from Banco Mediolanum: A variable interest rate based on the Euribor +1.65% is applied throughout the repayment period. For the best terms and conditions, the bank requires mortgage-holders to set up direct payroll deposit, have income above 35,000 euros a year, or purchase a life insurance. It finances up to 80% of the appraised value of the home.

7. Unoe Mortgage, from Unoe: No sign-up fee. It has an interest rate based on the Euribor +1.65% if the payroll is directly deposited to the bank and if a home insurance as well as a single-premium financed life insurance policy is purchased along with it. It provides up to 80% of the appraised value of the property with a minimum of 30,000 euros.

8. Net Fidelis Mortgage, from Caja España-Duero: It can only be hired over the internet. The first 12 months bear interest at 2.25%, while to the rest of the repayment period applies Euribor +1.65%. To obtain this mortgage, the owner has to set up direct payroll deposit, hire insurance (life, payment protection and home), two cards and a pension plan through the bank. It finances the lesser value of 80% of the price of sale and appraisal.

9. Triodos Mortgage, from Triodos Bank: In this mortgage plan, the interest depends also on the energy rating of the house: the more sustainable, the more economical. Interest rate is based on the Euribor +1.65% if the holder also hires home and life insurance, sets up direct payroll deposit and direct debit of three utility bills, and signs up for both a credit and debit card.

10. Naranja Mortgage, from ING Direct: No commissions, the interest is the Euribor at +1.69% if the holder sets up direct payroll deposit or deposits at least 600 euros a month or maintains a minimum account balance of 2,000 euros, among others.

All these mortgages have a repayment period of up to 30 years. In the case of those offered by Unoe and ING Direct, the period goes up to 35 and 40 years, respectively.

The selection of loans was carried out among those offered by banks and did not take into account those aimed at specific target demographics, such as youths or civil servants, among others.

Original article: Expansión

Translation: Aura REE

Liberbank returns €124 Million To Frob

24/12/2014 – El Mundo

Liberbank has retired in advance the issued contingent convertible bonds (CoCo’s) of €124 million purchased by the FROB within a plan to recapitalize the company, through which it has returned the aid. With this, the company has a blue-chip capital ratio of 13.5%, far exceeding the minimum requirement of 8%.

Original article: El Mundo

Translation: Aura REE

No Truce at the Mortgage War: 12 Banks Offer Differentials Below 2%

29/08/2014 – Cinco Dias

In September 2008, all banks consistently started to refuse the loans as they saw one of the greatest recession on the planet was looming. However now, six years later, liquidity circles in the eurozone are going stable so financial entities can return to lending. Commercial leverages of their offices hand out mortgages, including those with homes as collaterals.

Large majority of the entities offer interest rate differentials below 2% plus Euribor for 12 months, whereas less than a year ago they could not afford for less than 3%. Bankinter was the first to break the pattern with a 1.95% + Euribor mortgage last year.

The challenge was soon accepted by the rest of the banks and reached its fever peak in the last months. ING Direct, Barclays, Deutsche Bank, Sabadell, Liberbank and Unoe are among those that trimmed their differentials below 2%.

Since July, BBVA is the number one with its up to (or down to) 1.7% + Euribor loan (2.25% in the first year). Obviously, the final price will depend of the economical record of the client and the loyalty products they buy together with the mortgage.

Aside from the competitive Cajasurs credit found exclusively in Andalusia and Extremadura, BBVA is second to no one. However, the spread of Santander (1.89%) treads on its heels.

According to data gathered by the Ministry of Public Works, the surplus cash in hands of banks currently exceeds €100 billion in the euro zone and the fact that the property prices have fallen by over 30% since the 2008 peak are key for recovery of the real estate market. The number of new mortgage approvals has already risen by 19%, as per information published by the National Insititute of Statistics (or INE by its acronym in Spanish).

The fierce deleveraging process run by financial entities and the necessity to return to their traditional business also impulsed the improvement in lending. Official statistics start to confirm the new credit flow. According to Spains central bank, in June mortgages with a house as collateral represented more than €767 billion, though still much less than in 2008. Furthermore, the INEs information tells that in the same month, the average interest rate in mortgages was equal to 3.88%, compared with the 4.37% rate from May 2013.

At the new war on mortgages – although far away from the differentials of 0.3% seen in 2006 and 2007 – internet banking smooths its offers out as well. Even if the rates are similar to those proposed by classical entities (i.e. slighly lower than 2%), less loyalty products are required. Most sophisticated in this field turns out to be Evo Banco that cuts in the differential if the Euribor reference goes up. In the first year of the credits life, a customer pays a fixed rate and after the term the differential declines in line with Euribor. Thus, given that it was set at between 2% and 4%, the rate will shrink by 0.2%, in case of a 4% to 6% one by 0.4% and so on, and so forth.


Original article: Cinco Días (by P. M. Simón & V. Gómez)

Translation: AURA REE

Liberbank, BMN & Cajamar Sell Their Property Management Firms

21/03/2014 – Expansion, El Confidencial

Large banks already shed their real estate branches and now the time for small and medium-size entities has come. Liberbank, BMN and Cajamar seek success comparable to the sales of Altamira by Santander and Aliseda by Banco Popular in 2013.

The ongoing operations are being advised by PwC on the side of BMN and by KPMG on Cajamar´s side. (…). Starting prices may vary from €40 million to €90 million. (…).

BMN manages assets valued at around €7.000 million, out of which €5.800 million (about 80% of the total) has been transferred to Sareb. The most probable final price will be set at €50 million. The entity received offers from Cerberus, Portigon and Almar Consulting, however the final bidding will be settled between Apollo and Centerbridge (that bought Aktua from Banesto).

Cajamar is believed to receive higher amount for its asset managing company as it owns great part of the €10.000 million-worth assets. The bank´s Cimenta2 is put up for sale within the ´Iceland Project´that involves administration of its defaulting loans. (…). The assets for sale are found mostly in the coastal area where rule such mergers as: Caja MurciaCaja GranadaSa Nostra and Caixa Penedés.

When it comes to Liberbank, it has been trying to sell its platform since last year. The bank is a merger of CajasurCaja de ExtremaduraCaja Cantabria and CCM. It transferred to Sareb €2.900 million in assets and still is obliged to return €124 million bail-out granted by the FROB.

Potential purchasers of the three platforms may be divided between two groups:

1. Those who already acquired a property platform in Spain but still seek more market share: Apollo (owner of Altamira), Värde Partners and Kennedy Wilson (Aliseda), TPG (Servihabitat), Centerbridge (Aktua) and Cerberus (Bankia Habitat).

2. Those who have not managed to buy any platform in 2013: Lone Star, Fortress, WL Ross and Starwood, among others.



Original article: Expansión (Jorge Zuloaga), El Confidencial (Carlos Hernanz)

Translation: AURA REE