Tag: Novagalicia

INE: Land Sales Increase By 10.5% In 8m To Aug

27 October 2015 – Cinco Días

This week has seen the conclusion of the two major annual events in Spain’s real estate calendar: the Real Estate Trade Fair in Madrid (SIMA) and Barcelona Meeting Point. In addition to a sharp increase in the number of private visitors, this year more companies have wanted to be present at both events, because the figures clearly show that more houses are being sold, at higher prices (the price decreases have now come to an end across most of the country) and most importantly, new properties are being constructed once again.

Given that land is the raw material required to launch new developments, it was crucial for funding to return to this segment of the market as well, and the statistics show that the trend there is now reversing. Not only are more mortgages being granted to acquire homes and complete developments abandoned due to the crisis, loans are also being granted once more to buy land. (…)

According to the latest available statistics, compiled by INE, for the period from January to August 2015, 48,905 plots of land were sold in Spain during the first 8 months of the year, an increase of 10.5% compared with the same period in 2014 (when 44,237 plots were sold). If this trend continues, 2015 will close with a significant increase on the number of plots of land sold last year (65,821), breaking the downward trend that began in 2007 (the first year this data was collected) when 195,269 plots of land changed hands.

What are investors looking for?

In terms of whether more or fewer mortgages are being granted on the plots of land being sold, the figures do not yet reflect an overwhelming improvement (…).

Again, according to INE, between January and July (the data for August is published today), 4,897 mortgages were granted for plots of land, a decrease of just 1.6% compared with the same period last year, when the number amounted to 4,979. Like in the case of land sales, if the trend in mortgages granted for land is maintained between now and the end of the year, then 2015 will close with an increase in the number granted for the first time since 2009.

For the experts and everyone now working in the real estate sector (including the banks, the Socimis and the new servicers), the fact that financing has returned to the land segment is very good news, since this will revive the construction of new builds. Above all, we are now starting to see studies that show that one of the imbalances on the horizon in the market is the lack of offices, developable land and industrial warehouses in prime and other good locations in cities, which is what exactly national and international investors are looking for.

Finally, if this trend continues and improves, it will be a great relief for the banks, since 37.8% of the almost €80,000 million in foreclosed real estate assets that last year weighed down on the balance sheets of the main Spanish financial entities (Santander, BBVA, CaixaBank, Sabadell, Popular, Bankia, Bankinter, Kutxabank, Unicaja, Ceiss, BMN, Liberbank, Ibercaja-Caja3, Novagalicia and Catalunya Banc) related to land, the same percentage as for finished homes, which accounted for 37.1% of the total, according to a study by the Department for Research and Economic Analysis at La Caixa.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

BBVA’s Purchase Of Catalunya Banc Is “Unblocked”

16 April 2015 – El Mundo

Yesterday, the US fund Blackstone finalised its purchase of a portfolio of problematic assets from Catalunya Banc (which is known by its commercial name: ‘Catalunya Caixa’) for €4,123 million. This transaction unblocks the acquisition of that entity by BBVA, which now just needs to be approved by the EU’s competition authorities.

The Fund for Orderly Bank Restructuring (the FROB) confirmed yesterday that the transaction had been conducted through the transfer of the portfolio to an asset securitisation fund, with the support of the public body itself, which sits under the Ministry of the Economy.

Specifically, the FROB will subscribe to a bond issue amounting to €524.9 million, whilst Blackstone will contribute €3,598.4 million. As a result of this transaction, the US fund will acquire a portfolio of problematic loans amounting to almost €6,400 million. Last summer, the portfolio aroused (a great deal of) interest from several funds that specialise in the management of doubtful debts.

Boost to business

The completion of this sale was a necessary condition for BBVA’s purchase of Catalunya Banc to go ahead. BBVA won the competitive tender against Santander and CaixaBank.

The entity chaired by Francisco González offered €1,187 million for the ill-fated savings bank, although the final price will be lower once cumulative tax credits have been deducted and because a series of guarantees will take effect in the event that the assets acquired are impaired by more than expected.

This purchase has allowed BBVA to gain a significant presence in Catalunya, where it is now the second largest entity by market share (accounting for almost 30%), exceeded only by CaixaBank. The transaction has also allowed BBVA to boost its asset management business, by adding around €2,000 million of assets under management.

Just like in the case of Novagalicia, the tender for Catalunya Banc has received criticism from those who believe that the State has rushed to sell of both of the entities. The losses of the Catalan entity alone amounted to €11,500 million.

Original story: El Mundo (by J. G. Gallego)

Translation: Carmel Drake

Sareb Continues To Review Its Asset Transfer Prices

12 March 2015 – Expansión

‘Sareb got married in a rush, without preparing a gift list, and after the ceremony it began to realise what the gift boxes it had come home with actually contained’. Shortly after the creation of the bad bank, one of its senior executives used this metaphor to explain the need to review the assets that the entity had received from the former savings banks.

In order to meet the deadlines set by Brussels for the financial bailout, Bankia, Novagalicia, Catalunya Banc, Banco de Valencia, Banco Gallego, Banco Mare Nostrum, Liberbank, Cajatres and Ceiss transferred a huge volume of properties and developer loans (to Sareb) in a mad rush.

On the basis of valuation reports performed by independent experts, the Bank of Spain set the price that Sareb paid for the assets: €50,781 million in total, in bonds guaranteed by the State. But Sareb reserved the right to review these transfer prices, in an operation known as the “correction of hidden flaws”, to make up for errors in both valuation and scope (perimeter) – assets that did not fall within the perimeter in the end and assets that should not have fallen inside the perimeter – and to make a claim for the difference.

One of the peculiarities of the transfer review mechanism is that the bad bank only allows for corrections in its favour. After reporting the errors detected to the former savings banks and evaluating the claims, Sareb corrects the differences by repaying the bonds it used to pay for them.

To date, the bad bank has already recovered €640 million of the amount it paid to the entities in relation to both valuation and scope (perimeter) errors. The entity most affected to date has been Catalunya Banc, with €318 million (of corrections), followed by Novagalicia (€182 million) and Bankia (€127 million).

But this total amount is expected to rise, because the company chaired by Jaime Echegoyen has reserved its right to review prices for up to 36 months, a period that will expire at the end of 2015 for the entities classified in Group 1 (Bankia, Novagalicia, Catalunya Banc and Banco Valencia) and in February 2016 for the entities in Group 2 (BMN, Liberbank, Ceiss and Cajatres).

Nevertheless, Sareb does not expect to work up until the deadlines in every case. It has already closed an agreement to finalise the review of the price paid for the assets transferred from Novagalicia, Catalunya Banc, Banco de Valencia and Ceiss. Now its investigation will focus on the properties and loans transferred from Bankia, Liberbank, and BMN; it still needs to sign an agreement to finalise the review with Banco Gallego or Cajatres.

Moreover, Sareb reserves the right to review for scope errors until the end of the remaining life of the (corresponding) asset(s), for those assets it paid for but which were never transferred or those that were transferred when they should not have been, such as any consumer loans.

The experts at the asset management company are basing their detailed analysis on the audit that was conducted by a consortium of thirteen companies, coordinated by the law firm Clifford Chance, but they will go into more detail for certain samples.

Original story: Expansión (by Alicia Crespo)

Translation: Carmel Drake

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