5 November 2015 – El País
The banks still have not fully digested the over-indulgence in real estate that preceded the crisis. The volume of assets foreclosed by financial entities due to the non-payment of loans amounted to €81,000 million as at 30 June 2015, having decreased slightly, by 0.9%, in one year, according to figures published yesterday by the Bank of Spain in its Financial Stability Report. Moreover, the main component of this €81,000 million hangover, is land, the least productive of all assets and also the hardest to sell. Land represented 35.5% of the total balance, in other words, around €28,500 million of the foreclosed assets held by banks are plots of land.
Since the crisis began, the banks have not been able to significantly decrease the volume of real estate assets on their balance sheets. Although they are selling homes and developments as fast as they can, they are still foreclosing new properties due to non-payment.
Only the clean-up of balance sheets that took place in the second quarter of 2012 and the first quarter of 2013, when the rescued entities transferred most of their real estate assets to the bad bank, led to in a decrease in the total volume. Since the middle of 2013, the volume of properties on the banks’ balance sheets has not stopped growing and it peaked at €82,500 million at the end of 2014. During the first half of 2015, the balance decreased by around €1,500 million, or 2%.
More foreclosed homes
In terms of the composition of the banks’ real estate portfolios, 35.3% corresponds to land, whose weight has decreased by almost 3 percentage points in the last year. Meanwhile, 24.9% are finished buildings (amounting to just over €20,000 million, with a reduction of 1.1 points in the last year), with work in progress buildings accounting for 6.6% of the total, having increased by 1.6 points. Finally, 21.5%, or c. €17,400 million of the total, relates to foreclosed assets resulting from house purchases (which increased by 0.5 points with respect to June 2014).
“If we add doubtful assets to those assets that have been foreclosed in lieu of the debt payments, then the banks’ held assets amounting to €224,000 million on their balance sheets as at June 2015, none of which are generating any revenues for the income statement. These two types of assets, which represent 8.7% of the banks’ total assets in Spain, are placing negative pressure on the entities’ income statements, reducing their ability to generate profits”, says the Bank of Spain in its report.
Original story: El País (by Miguel Jiménez)
Translation: Carmel Drake