Liberbank Finalises Property Sale To Ensure Success Of Capital Increase

4 October 2017 – Cinco Días

Liberbank does not want to follow in the footsteps of Popular and is taking firm strides to avoid that fate. Its focus now is on shaking off the property that it still holds following the crisis, in order to project the image in the market that it has cleaned up its books and to ensure the success of its upcoming capital increase. In this way, the entity is finalising the sale of a large part of its portfolio of foreclosed assets this week, in parallel to the capital increase, which its General Shareholders’ Meeting is expected to approve on 9 October.

The entity led by Manuel Menéndez is working against the clock to ensure its independence. The CNMV has given it until 30 November to extend, for the third time, a veto on short positions that it imposed in June, a few days after Popular’s future was resolved. Sources close to the operation expect the first stage (the sale of a portfolio worth €800 million) to be closed this week. Or within 15 days, at the latest, since in that case, it would be performed in parallel to the start of the capital increase.

Liberbank received the first binding offers at the beginning of last week. And from those, it has selected three funds: KKR, Bain and Cerberus. The latter is the firm that acquired the bank’s real estate subsidiary, Mihabitans, in the summer, through Haya Real Estate. It spent €85 million on that purchase. The market described the operation as a “success” and uses it as an example for the upcoming sale of the toxic property.

Haya is exclusively managing the current foreclosed real estate assets on Liberbank’s balance sheet, as well as any future foreclosed real estate assets that end up being incorporated onto the bank’s overall balance sheet or onto those of any of its real estate subsidiaries. According to the accounts for the first half of the year, Liberbank held €3,115 million in foreclosed assets on its balance sheet, with a provision coverage ratio of 40%. Of those, €1,741 million are finished homes, €1,162 million are plots of land, €480 million are homes under construction and €402 million are offices and warehouses.

This new sale of foreclosed assets, dubbed ‘Operación Invictus’, will be closed for a price of around €400 million. Although the book value of the real estate assets in the portfolio is €800 million, the sale will be closed at a discount of at least 50%. Santander closed the sale of 51% of Popular’s property to Blackstone at a discount of 66%.

With the aim of wiping out the losses that this sale will generate and of getting rid of a large part of its real estate portfolio, once and for all, the Board of Directors of Liberbank proposed a capital increase on 6 September, which they are now trying to safeguard. The bank hopes to raise €500 million through the operation. The objective is for the bank’s default ratio to amount to 3.5% by 2019 and for the coverage ratio on its non-performing assets (doubtful loans and foreclosed assets) to rise to around 50%. At the end of June, Liberbank recorded figures of 11.3% and 40% for these ratios, respectively.

With a balance sheet of €40,000 million, Liberbank is the smallest entity of those supervised by the ECB, together with Banco Crédito Social Cooperativo, the parent company of Cajamar. One of Liberbank’s other missions is to increase its return on equity (ROE) to 8% by 2020, compared with the figure of 2.7% recorded during the first half of this year. It is the second time that the bank has increased its share capital since it started trading on the stock market in 2013. The previous capital increase, in May 2014, saw it raise almost €500 million.

Then, the bank responsible for coordinating the operation was Deutsche Bank; now it is being managed by Citi. Last time, the injection of fresh funds allowed the entity to early repay €124 million that the FROB (Fund for Orderly Bank Restructuring or ‘Fondo de Reestructuración Ordenada Bancaria’) had injected it with; to strength its top-tier capital ratio to more than 10%, as if the Basel III requirements were completely applicable; and to bring forward the payment of dividends to its shareholders.

Original story: Cinco Días (by Álvaro Bayón and Pablo M. Simón)

Translation: Carmel Drake

Liberbank To Increase Capital By €500M To Reduce RE Portfolio

7 September 2017 – RTVE

The financial institution Liberbank is going to increase its share capital by €500 million to “accelerate” the reduction in its real estate portfolio and improve its profitability. The bank, which resulted from the merger between Cajastur-Banco CCM, Caja Cantabria and Caja Extremadura, has set itself the objective of divesting its real estate and doubtful assets, amounting to €800 million, before the end of the year, according to a note submitted to Spain’s National Securities and Exchange Commission (CNMV) on Wednesday.

Liberbank has announced this operation as the prohibition period for the short selling of its shares is due to come to an end. The ban was imposed by the CNMV after naysayers set their sights on the entity following the intervention of Banco Popular and its subsequent purchase by Santander.

On 12 June, the National Securities and Exchange Commission initially established a trading restriction lasting one month, after Liberbank’s share price fell by 40% in just one week, due to the effect of Popular. It then extended the ban for two more months, until 12 September.

The General Shareholders’ Meeting will analyse the capital increase on 9 October

Liberbank’s Board of Directors will propose the €500 million capital increase for approval at the next Extraordinary General Shareholders’ Meeting due to be held on 9 October.

The intention is “to accelerate” its strategic objectives and plan to improve profitability by strengthening its balance sheet and improving its risk profile. Currently, retail mortgage risk accounts for 60% of the entity’s total credit investment, according to Europa Press.

Specifically, the entity expects the default rate to amount to 3.5% by 2019 and for the ratio of foreclosures to fall below 9%; it also expects the coverage ratio to increase to around 50% by the same date.

The forecast return on equity (ROE) is 7% for 2019 and 8% for 2020. The entity plans to pay remuneration to shareholders, which it will charge to the P&L in 2018 with a payout of 20%, which will increase to 40% in 2020.

The major shareholders support the operation

The entity’s major shareholders, which together account for around 68.8% of the total share capital, such as Oceanwood (with a 12.6% stake), Aivilo – Ernesto Tinajero (7.4 %) and Corporación Masaveu (5%), together with the Banking Foundations (43.8%) support this operation and have already expressed their intention to participate in the capital increase, confirmed the bank.

At the end of trading on Wednesday, Liberbank’s shares were trading at €0.97, after increasing by 0.21% during the day. The company’s total share capital amounts to €900.54 million, according to Efe.

Original story: RTVE

Translation: Carmel Drake

Project Baracoa: Cajamar Puts €800M Portfolio Up For Sale

21 January 2016 – Expansión

The banks have begun 2016 with the firm intention of accelerating the clean-up of their portfolios of problem assets. In this vain, Grupo Cooperativo Cajamar has put up for sale €800 million of loans granted to now bankrupt companies, and has whereby joined Banco Popular in the market, which announced yesterday that it wants to sell €8,000 million of real estate assets this year.

Cajamar’s operation is the one of the largest to go on the market in recent months and matches the scale of others launched by larger groups such as CaixaBank, Bankia and Sabadell.

With this operation, Cajamar is looking to reduce its default rate, which is one of the entity’s Achilles heels. The ratio amounted to 14.27% in September 2015, having decreased by two percentage points in twelve months.

The operation has been launched by N+1 under the name Project Baracoa. The portfolio contains 966 loans to companies that have now filed for bankruptcy. The loans are worth almost €800 million and 85% are secured by real estate collateral.

Cajamar has closed other operations of this type in recent years, such as the sale last year of a €640 million portfolio of unsecured written-off loans to Cerberus. That is one of the funds with which the cooperative group has done the most business, including the sale of its real estate management unit, Cimenta 2, for €225 million, plus €20 million depending on the performance of the business plan.

In addition, the US fund is one of several investors that has been sounded out regarding a possible investment in the share capital of Cajamar’s bank, Banco de Crédito Cooperativo (BCC), in the event of a potential capital increase prior to an eventual IPO. For the time being, Generali and TREA Capital have both become shareholders.

BCC is the only Spanish cooperative group to be supervised by the ECB. The entity brings together the business of 32 rural savings banks: 19 that form Grupo Cooperativo Cajamar – the vendor of the Baracoa loan portfolio – and another 13 entities, which are also shareholders of the bank, but through a cold merger. BCC had assets worth just over €40,000 million at the end of September 2015.

The entity saw its results drop in 2015, as it generated lower gains from its financial operations (ROF). As such, it earned €39 million during the 9 months to September, i.e. 46% less than during the same period in 2014.

However, the group still generates sufficient margins to continue increasing its revenues by reducing the price of its deposits, as a result of which it increased its interest margin in 2015. The lower provisions were good news for the group, as they decreased by 60%. Despite that, profitability (ROE) decreased to 1.9%.

One of the challenges still facing the group led by Cajamar is the need to clean-up its portfolio. The entity still holds almost €3,000 million of loans to property developers.

One of the areas on which the entity is trying to focus in order to increase its portfolio of profitable loans is consumer finance, with the signing of an alliance with Cetelem, owned by BNP Paribas. Cajamar has also teamed up with other companies, such as those specialising in insurance, namely Generali; and investment funds, such as TREA.

In terms of its integration, last week, the 19 entities led by Cajamar announced the homogenisation of their brand.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Caixabank Will Need 6 Years To ‘Digest’ Its Toxic Assets

2 February 2015 – Voz Pópuli

Caixabank’s real estate arm generated losses of €1,148 million in 2014. The volume of foreclosed assets increased to €6,719 million, above the figure in 2013. The entity did improve its coverage levels. However, profitability barely reached 2.7%.

Caixabank’s surfeit of toxic assets peaked at close to €30,000 million. It managed to trim that down to €20,110 million by the end of 2014. However, progress continues to be slow. The entity forecasts that its balance of doubtful real estate assets generated during the real estate boom will not be fully run down for another six years, if the current pace of asset sales is maintained.

The entity chaired by Isidro Fainé marketed 23,400 properties for rental and sale in 2014, which resulted in turnover of €2,512 million (i.e. a 15% increase for rentals and a 28% increase for sales). If we add the properties marketed by developers that are financed by Caixabank, these figures increase to 35,870 properties and turnover of €5,432 million. However, this intense activity generated losses of €1,148 million for the real estate division, a business that has a delinquency rate of 58.7%. The entity’s overall delinquency rate is 9.7%, having dropped down from double-digit levels last year.

Caixabank succeeded in reducing its default rate by two percentage points during the course of the year, to 9.7%. This reduction was made possible by the fact that the decrease in doubtful debts was greater than the contraction in new credits, which dropped by 4.8% during the year. Even so, the bank led by Gonzalo Gortázar emphasised the changing trend observed in the last quarter of the year, and the fact that its credit balance rose by 1.4% compared with the same period in 2013. Nevertheless, it does not expect credit balances to grow in the sector in 2015.

A two-phase approach for getting rid of toxic assets

Caixabank’s exit from this stock of toxic assets (€20,110 million) will take place in two stages. Over the next two years, its real estate business will continue to make significant losses, which will weigh down on Caixabank’s income statement, explains its CEO, Gonzalo Gortázar. The largest impact on the balance sheet will take place in 2017 when the doubtful properties become foreclosed assets. “On average, it takes 4 years to sell a foreclosed property”, explained Gortázar.

As at 2014 year-end, Caixabank had €6,719 million foreclosed assets, a little over €650 million more than at the end of 2013. This increase is explained in part by the decrease in doubtful assets. The Catalan entity recorded four consecutive quarters of declining doubtful assets. These foreclosed assets had a coverage ratio of 55%, 140 basis points more than at the end of 2013.

In terms of solvency, Caixabank closed 2014 with a core capital ratio of 13.1% (measured in accordance with the Basel III framework), an increase of 128 basis points on the previous year. The fully loaded ratio, with all the deductions that will apply in the near future until 2019, was 12.3%. Nevertheless, these good results contrast against an excessively low level of profitability. Caixabank’s ROE stood at 2.7% at the end of December, a long way off of the ratios recorded by other entities, such as Bankia, which recorded a ratio of 8.4% at the end of September.

Indeed, the quest for profitability will be one of the main priorities of the strategic plan that the entity will present in London on 3 March. The market is now expecting entities to record double-digit ROEs.

Original story: Voz Pópuli (by Miguel Alba)

Translation: Carmel Drake