Top 6 Banks Lose €15,300M From Real Estate In 4 Years

10 March 2015 – El Economista

The real estate sector continues to be a major problem for financial institutions despite the economic recovery. The largest 6 banks lost another €3,027 million last year from their main property development companies, which together hold the bulk of the foreclosed assets, due to unpaid loans.

Following the results reported in 2014, Banco Santander, BBVA, CaixaBank, Sabadell, Popular and Bankinter have now suffered losses of more than €15,300 million in the last four years from their real estate arms.

Nevertheless, the rate of loss is shrinking due to the stabilisation of (house) prices, which have decreased by 40% on average, and the increased sales of homes and, even land. This is in addition to the provisions that have already been made, primarily in 2012, when the Government forced financial institutions to increase their coverage ratios substantially in the face of doubts in the market over the real status of the system’s balance sheet.

Thus, the deficit reported by these companies decreased by 36% with respect to 2013 and by 45% with respect to 2012, but it continues to be 43% higher than in 2011.

The real estate arm of CaixaBank, BuildingCenter, recorded the greatest losses in 2014, according to data published by the entities. Specifically, it generated a loss of €1,280 million. The Catalan group had to clean up its balance sheet by €1,900 million in the middle of last year, through a capital injection to adjust its balance sheet. Its losses have amounted to €3,000 million in the last two years.

Diminishing impact

Indeed, the Catalan group is the least optimistic about the property situation in our country. At the end of January, its CEO, Gonzalo Gortázar, predicted that the accounts of the real estate company “would continue to be significantly impacted” this year and next. Although, he did point out that the impact should diminish.

Canvives, owned by Popular, was the property developer that recorded the smallest losses: €52 million. The company, which used to be owned by Pastor, was merged into the group chaired by Ángel Ron. The deficit of this subsidiary has decreased by 91% in two years after the clean up. Popular holds another large real estate company in its portfolio, Aliseda, which generated additional losses of €146 million last year.

According to its management tem, Popular managed to sell property at a price slightly higher than its book value, after applying provisions, and it doubled its turnover (from this activity), to generate €1,500 million.

The bank, chaired by Ángel Ron, expects to increase the sale of property by 33% this year, as it gradually reduces this type of asset. It was the last entity to launch an aggressive price policy and it is intensifying (its efforts) to reduce the volume of homes and land it holds.

Santander’s property developer generated the some of the smallest losses last year. Just €119 million. This company’s deficit over the last four years amounts to €1,788 million in total.

Santander, like Popular and CaixaBank, is supported by funds, which strengthen the sale of their properties. The three banks have got rid of the majority of the capital (they held) in the platforms they use to manage this type of asset, with the objective of outsourcing the service and achieving gains with which to shore up their capital resources.

The strategy followed by BBVA, Sabadell and Bankinter is somewhat different; they have retained the overall management of their foreclosed properties, although in the case of the first two, the option of finding a specialist industrial partner has not been ruled out. Under no circumstances do these entities expect to partner up with any funds.

The volume of foreclosed assets increases

Although the volume of sales has accelerated, the balance of foreclosed assets is continuing to increase; although if we exclude the stakes held in property-related companies, this balance decreases for the first time since the crisis. In this sense, last year, Santander and BBVA succeeded in reducing the volume of homes and land in their portfolios. The former reduced its balance by 1.8%, to €7,851 million gross (excluding provisions), whilst the latter decreased it by 5%, to reach €13,016 million.

The six listed banks, excluding Bankia, which transferred the majority of its properties to Sareb during the financial bailout, together held foreclosed assets amounting to €70,000 million at the end of 2014, including the stakes they owned in property development companies. This means that the balance had increased by 9% with respect to 2013.

The forecasts made by the entities themselves indicate that all of this stock will have been liquidated within five or six years. Santander, for example, expects to decrease its balance by 20% each year, which means that it may have got rid of the entire volume of homes and land in its portfolio within five years. However, this will all depend on the economic conditions in our country and the recovery of the property sector, which is starting to see the light at the end of the tunnel.

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake

The real estate companies of Banco Popular and Banco Pastor lost 1564 million Euros.

The main real estate companies of Grupo Popular experienced losses for 1564 million Euros last year.

The red numbers of Aliseda, the most important subsidiary of Banco Popular before integrating Pastor, reached 975 million Euros. These losses surpass 3,7 times those experienced by the institution in 2011 (260 million Euros).

As a consequence of this result, Aliseda presented a negative equity of 1216 million Euros at the end of December 2012, opposite to the 30 million Euros he had on the previous year. According to the annual accounts of Popular in 2012, the assets of Aliseda were 2873 million Euros at the end of 2012, while their value in books reached 357 million Euros.

The losses of the real estate company of the former Banco Pastor, Inversiones Inmobiliarias Canvives, reached 589 million Euros last year, with a negative equity of 671 million Euros.

Both companies are controlled fully by Popular and do not have any shareholding relationship between them. The results of both institutions are, according to the bank, a consequence of the great effort in provisions made last year. Popular carried out a restructuring plan in 2012 which included a capital extension of 2500 million Euros. The institution provisioned 9600 million Euros, causing consolidated losses of 2461 million Euros in 2012, opposite to the profit of 480 million Euros in 2011.

Sources within the bank stress that Popular is now the Spanish financial institution with more coverage in its exposure to the real estate sector. With this restructuring effort, Popular has increased the ratio of global coverage of defaulting debtors up to 65%; while the ratio of coverage of unsuccessful debtors reaches 74%. The bank plans to earn 500 million Euros in 2013.

Popular obtained last year a gain of 122 million Euros with the sale of properties.

The group has started the concentration of its real estate subsidiaries. Aliseda has absorbed nine minor institutions which originated from Pastor and whose contents were awarded assets. Canvives has integrated another company as well.

Source: Expansión