Bank of Spain: Real Estate Loans Account for 40% of All New Lending

3 May 2018 – El Confidencial

The Spanish economy is returning to its roots. New real estate loans granted to households, in other words, lending that does not include the renegotiation of existing loans, is now growing at an annual rate of 17.4%. In total, such lending amounted to €36.5 billion in 2017.

And this is not a one-off blip. So far this year, although the rate of growth has softened, it still rose by 11.1% during the first quarter compared to the same period last year. That explains how real estate loans now account for 37.4% of all lending that households requested in 2017, which amounted to €97.5 billion in total.

Those €36.5 billion that were used to buy properties exceeded the amount spent on the purchase of consumer goods (€29.1 billion) and the amount that was financed through credit cards (€13.3 billion), whose growth was very significant.

Paradoxically, the most expensive financing – financial institutions apply significantly higher interest rates when consumer acquire goods using credit cards – grew by 20.3%. Therefore, by five times more than the increase in nominal GDP (with inflation).

Data from the Bank of Spain leaves no doubt about the recovery in real estate lending boosted by low interest rates, which explains that the number of renegotiations is still very active, although it has decreased with respect to two years ago, when many households changed the conditions of their loans to benefit from the European Central Bank (ECB)’s ultra-expansive monetary policy.

Specifically, between 2015 and 2017, Spanish households renegotiated loans amounting to almost €18.0 billion, which allowed them to benefit from the extraordinary monetary conditions. In fact, 1-year Euribor remains at -0.1890%, which has encouraged increasingly more households to opt for fixed-rate mortgages over variable rate products.

The average interest rate on new operations for the acquisition of homes amounted to 2.21% in February, which represented a slight increase of 16 hundredths with respect to the previous month. In any case, these are tremendously favourable real interest rates (with respect to inflation), which boost property sales.

Property bubble

The credit map reflecting the Bank of Spain’s statistics reveals two very different realities. On the one hand, as described, new real estate lending has soared, but on the other hand, the amount granted before 2008, which is when the real estate bubble burst, is continuing to fall very significantly. In other words, families are continuing to repay their loans and, therefore, reduce their indebtedness, but, at the same time, new operations are growing strongly.

A couple of pieces of data reflect this clearly. In 2011, the outstanding loan balance dedicated to real estate activities amounted to €298.8 billion, but by the fourth quarter of 2017, that quantity had decreased to €110.0 billion (…).

The importance of the real estate sector in the Spanish economy is key. And, in fact, the double recession was very closely linked to demand for housing, which fell by no less than 60% between 2007 and 2013. In particular, due to the drag effect on the other components of private consumption (…).

The data on real estate lending are logically consistent with those offered by Spain’s National Institute of Statistics (INE) on the constitution of mortgages, which reflect an increase of 13.8% in February (the most recent month for which data is available) compared to a year earlier. In total, 27,945 mortgages, with an average loan value of €119,708, were granted (…).

Original story: El Confidencial (by Carlos Sánchez)

Translation: Carmel Drake

Bankia Granted €16,600M In Loans In 2015, Up By 12.5%

22 January 2016 – Expansión

Last year, Bankia granted €16,600 million in new loans, in particular to companies and SMEs.

Bankia has reported today that the volume of new loans it granted last year increased by 12.5% compared with 2014, to reach €16,600 million in total.

The entity, which will present is annual results on 1 February, did not disclose any information about the evolution of its loan balance, although experts think that it will have decreased, in line with what happened in the third quarter, due to (the trend in) mortgages and the sale of portfolios.

By contrast, they expect that the balance of loans to companies will have closed the year up, after recording several quarterly rises. Specifically, this balance had increased by 5.1% as at September.

Bankia pointed out that almost 84% (€14,000 million) of all the new loans granted were taken out by companies. And, within that segment, the group that experienced the greatest increase (in percentage terms) were self-employed people, to whom new financing increased by almost 73% to reach €216 million.

Meanwhile, the bank granted more than €3,200 million in loans to SMEs, compared with €2,250 million during the same period in 2014, which represents an increase of 43%. Larger companies were granted loans amounting to €10,500 million.

Original story: Expansión (by M. R.)

Translation: Carmel Drake

BFA-Bankia Sells €645M Loan Portfolio

4 January 2016 – Expansión

As a result of this operation, the entity has reduced its doubtful debt balance by €414.3 million (€410.5 million relates to Bankia and €3.8 million relates to BFA).

BFA-Bankia has sold a loan portfolio amounting to €645.1 million. All of the loans had been granted to the business sector and some had been secured by real estate collateral, according to a statement issued by the group on Tuesday 22 December 2015.

Through this operation, BFA-Bankia was seeking to achieve two objectives, namely: to increase liquidity and free up resources to grant new loans; and to reduce its default rate by selling off doubtful debts.

In fact, with the sale of this portfolio, the group has reduced its doubtful loan balance by €414.3 million, of which €410.5 million relates to Bankia and €3.8 million to BFA.

Of the total loan portfolio sold, €564.3 million came from Bankia’s balance sheet and another €80.8 million from BFA’s.

The group explained that this operation will have a “minimal (positive) impact” in terms of capital and that, to maximise the price obtained, the sale has been conducted as a competitive process between “first tier” institutional investors and financial entities.

“The entity is continuing to move forward with its commitment to divest all of its non-strategic assets”, the group said.

Original story: Expansión

Translation: Carmel Drake