Tag: property developer loan

Bankia Plans to Grant €400M Per Year in Property Developer Loans

28 February 2018 – El Confidencial

Talking about property developer loans at Bankia is like mentioning rope in the house of a man who hanged himself. Nevertheless, José Ignacio Goirigolzarri is not only not afraid of the business that took his entity to the brink of bankruptcy, he also wants to become an important player in that segment once again. His aspiration is to reach a market share of between 7% and 8% between now and 2020, which would mean granting more than €400 million per year since then. That is according to the new strategic plan for 2018-2020 presented by the entity on Tuesday. The plan did not excite the market for its forecasts, but rather for the announcement that it is going to return 20% of the bank’s capitalisation to its shareholders.

The President of Bankia estimates that “the real estate development market, in terms of turnover (not balances) is going to amount to between €5 billion and €5.5 billion over the next three years. We aspire to reach a market share in the origination of new loans of between 7% and 8%, from the 0% that we registered at the end of 2017”. The restructuring plan imposed by the European Commission for the entity’s rescue with public money prohibited it from participating in that business until now. “We think that it is reasonable and that we will be able to achieve it”, he added.

This ambition to enter the property developer loan market contrasts with its prudence in terms of retail mortgages, where it expects a decrease of 2.2% during the year. Bankia explains that “mortgages account for a very significant weight, representing around two-thirds of the bank’s total portfolio. It is reasonable for the balance to decrease and for higher quality loans to join the fold”.

These figures are incomparable with those recorded during the real estate bubble that burst in 2008: the entity transferred property developer loans and foreclosed assets to Sareb amounting to €22.3 billion. But the return to this activity by Bankia is nevertheless significant, no matter how much Goirigolzarri assures that “it does not represent a large lever” for future results. Moreover, the President clarified that now the developments are more concentrated both geographically – Madrid, Cataluña, Andalucía and Valencia account for 65% of the total – as well as business-wise – the largest 20% of operators control 25% of the market.

Is it different this time?

(…). According to one source in the sector, “it seems that the banks have emptied their balance sheets of property and are now wanting to fill them up again”. The move is so clear that even the Bank of Spain has issued its first warnings to the sector and has introduced safeguards in the form of the new accounting circular to prevent a repetition of the disaster.

The major argument that the entities are using to justify themselves is one that you always hear before any crisis: “This time it’s different”. “Despite the best moment, the banks are now much more prudent when it comes to granting loans. In the property developer business, for example, we are analysing the feasibility of the project to be financed in great detail, as well as the solvency and professionality of the applicant, who will also have to assume part of the risk associated with the operation”, said one of the big four.

The proposal to return capital attracted more attention than the plan itself

In all other respects, the strategic plan presented on Tuesday did not surprise the market, given that it is less aggressive than those unveiled by the bank’s competitors recently. Basically, Bankia forecasts that its profits will grow to €1.3 billion in 2020 due to: rate hikes (it is the entity that will benefit the most from the forecast increases); even greater synergies with BMN than expected (€190 million vs the €155 million previously announced); and a reduction in toxic assets and in the need to recognise provisions against them. It also expects to increase its market share in all segments, although that will account for less than 20% of its forecast growth.

Original story: El Confidencial (by Eduardo Segovia)

Translation: Carmel Drake

Morgan Stanley Lends Cerberus €3bn to Purchase BBVA’s RE

1 December 2017 – Voz Pópuli

Of the cheque for €4 billion that BBVA is going to receive for the sale of its foreclosed real estate, €3 billion will be coming from Morgan Stanley’s coffers. The US investment bank has been awarded the mandate to finance Cerberus’s operation, whereby fighting off competition from other international and Spanish entities, according to financial sources consulted by Vozpópuli.

Unlike in the case of Blackstone and Popular-Santander, Cerberus has decided to close its financing arrangements in advance, even though the small print of the agreement will still take a few months to negotiate.

As this newspaper revealed, BBVA has agreed to sell all of its foreclosed assets to the US fund in an operation worth €5 billion. A new company will be created to which assets worth €13 billion and the Anida platform with its 450 employees will be transferred, with the option of also moving another 150 employees from the bank. And Cerberus will buy an 80% stake in this company for around €4 billion.

The figures may still vary slightly over the next few months, given that both BBVA and the fund have to review which assets have exited the portfolio in recent months because they have been sold (through the network).

The start

The operation, known as Project Marina, was launched at the beginning of June and is expected to be closed with a discount of approximately 61%, which is lower than the 67% that Santander obtained from its sale of Popular’s real estate.

That sale – Project Quasar – is also pending completion, expected during the first quarter of 2018.

After removing €13 billion in foreclosed assets from its balance sheet, BBVA will put one or more property developer loan portfolios on the market over the next year or so, as it continues to accelerate the digestion of its property assets. Those portfolios will be similar in size to Project Jaipur (€0.6 billion), which was also awarded to Cerberus.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake