Evo Buys GE’s Spanish Mortgage Business For c. €300M

14 April 2016 – Expansión

As a result of this operation, involving Evo’s acquisition of almost €400 million in mortgages from GE Capital, Apollo’s subsidiary expects to increase its balance sheet by 10% and its loans to customers by 25%.

(…). The Spanish subsidiary of the US fund Apollo is acquiring General Electric’s mortgage business in Spain: almost €400 million in loans to individual borrowers, according to financial sources consulted by Expansión. According to the same sources, Evo will pay almost €300 million for the portfolio.

This operation brings the bank led by Enrique Tellado closer to its objective of achieving critical mass to emerge from the red in 2016.

Since Apollo acquired Evo, the former subsidiary of NCG Banco, the entity has registered three consecutive years of losses: €3.6 million in 2013, €78 million in 2014; and €13 million last year, according to the latest figures published, as at September, according to the Spanish Banking Association (AEB).

GE Capital Bank, the financial arm of GE, launched this divestment last year, as part of Project Zágato, advised by PwC. The portfolio, worth €400 million, contains 5,000 mortgage contracts and mainly contains loans that the US entity granted through APIs (real estate agents).

With this sale, GE Capital Bank is virtually shutting down its business in Spain, following the transfer of its leasing portfolio to Incus Capital, at the end of last year; and the repayment of the majority of its consumer loans.

This departure is the response to a change of strategy for the multinational company at the global level. At the beginning of 2015, GE decided to divest the majority of its financial business to focus on its industrial turbine, aircraft engine and medical equipment businesses, amongst others. It did so because of the risk posed by this financial exposure following the outbreak of the subprime mortgage crisis in 2008. At the time, the group had financial assets worth $500,000 million (€438,400 million).

Since then, GE Capital has been selling off parts of this business through different agreements in different countries, such as those signed with Evo and Incus in Spain.

This subsidiary reached its peak in Spain with partnerships that it signed with CAM and BBK before the crisis.

In 2008, it recorded losses and has remained loss-making ever since.

Quantitative leap

Project Zágato allows Evo Banco to make a significant quantitative leap. The portfolio acquired represents around 10% of its current balance sheet, which according to data from AEB as at November amounted to €4,000 million. The growth in terms of loans to customers is greater, almost 25%, given that it held €1,771 million last November.

Apollo’s standard strategy since it arrived in Spain has been to make purchases of entities, such as Evo Banco, which it acquired in 2013. Evo’s loan portfolio comprises purchases such as Finanmadrid, from Bankia; Bank of America’s credit card business; and portfolios of consumer credit and mortgages from Citi.

In the last few months, Evo Banco and Apollo have looked into other acquisitions in Spain, such as the BarclayCard sale, where it was pipped to the post by Bancopopular-e, the subsidiary of Värde Partners and Banco Popular, which is now in exclusive negotiations.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

GE Finalises The Sale Of Its Banking Business In Spain

16 December 2015 – Expansión

GE Capital Bank is finalising its exit from Spain. The financial subsidiary of the US multi-national is holding negotiations with several investors to sell its entire loan business in the country. According to various financial sources, the business is primarily mortgage based and has a volume of almost €600 million.

The multi-national company has engaged PwC to manage this operation, known as Project Zágato.

There are three key candidates on the list to take over GE Capital’s portfolio, namely: Blackstone, which has experience in the management of banking mortgages after its acquisition of Catalunya Banc’s loans; Oaktree, which closed a similar operation with Bankia earlier in the year; and Evo Banco, owned by Apollo, which is looking to grow its assets through this type of portfolio, like it did with a portfolio from Citi in April.

The mortgages that GE Capital has put up for sale have a default ratio of 30% and the majority come from loans that the US entity granted through APIs (real estate agents).

The Australian fund Pepper Group is currently managing the portfolio. The other businesses that the Group has in Spain, mainly consumer financing, have been maturing in recent months.

GE Capital’s exit from Spain comes in response to a change in the multi-national company’s strategy at the global level. At the beginning of the year, the US group decided to divest the majority of its financial activity to focus on its industrial business involving turbines, aircraft engines and medical equipment, amongst others. At the time, the group had financial assets amounting to $500,000 million (€455,000 million).

Strategic shift

The multi-national took this decision due to the commercial risk that the financial arm of its business represented when the financial crisis hit in 2008, despite the fact that it generated half of the group’s profits.

Since then, GE Capital has been selling off parts of its business through agreements such as the one reached with Wells Fargo in October, for the transfer of assets amounting to $32,000 million. Just over a year ago, when its financial unit had not yet been dismantled, it sold part of its consumer business in Sweden, Norway and Denmark to Santander, for €700 million.

The group began to withdraw from Spain at the beginning of 2015, when it delisted itself from the Spanish banking register. At the time, it had negative reserves of €220 million as a result of the losses accumulated over several years, due to its high default rate.

The entity first started recording losses in 2008 with €13.6 million and did not manage to emerge from the red until 2014, when it recorded profits of €53 million.

At the end of 2014, GE Capital Bank held assets worth €524 million, according to data from the AEB.

Before the outbreak of the crisis, GE Capital had partnerships in Spain with CAM and BBK.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake