Tag: supervisor

Fitch: Banks Will Continue To Discount Their Foreclosed Assets For 2+ Years

24 October 2017 – Expansión

Fitch report / Financial institutions are selling their real estate portfolios at discounts of between 50% and 70%; those levels are expected to be maintained for at least the next two years.

“We do not expect to see a close correlation between the improvement in the macroeconomic situation and lower discounts on the sale of portfolios of foreclosed real estate assets by the banks. In fact, we expect those discounts to remain at their current levels for at least the next two years”, said Alberto Faraco and Juan David García, analysts at the ratings agency Fitch.

Spain’s banks still hold significant volumes of real estate, inherited from the crisis, which they must get rid of by order of the supervisor. To accelerate the process, entities are selling portfolios of foreclosed real estate assets to international funds and, in exchange, they are demanding significant discounts with respect to the initial value of the properties.

According to Fitch, these discounts amount to between 50% and 70% of their value and the probability that they will continue for a while yet is high. “It is likely that not even the better tone of the Spanish real estate sector will lead to an increase in the prices at which the banks are selling their portfolios of foreclosed assets, given that there is a significant over-supply, which is exercising considerable pressure”, said Faraco and García, authors of the most recent report published by Fitch.

“The foreclosed properties are competing against a stock of around 500,000 recently built homes, which are ready for sale. Moreover, they are suffering from downwards pressure in terms of prices due to the profitability premiums that buyers require of the banks to cover uncertainties in the process”, said the analysts. The entities’ real estate portfolios carry a series of risks that can detract from the profitability obtained by a potential buyer, such as the fact that the dwelling cannot be accessed until the inhabitant is evicted.

Homes that the banks are responsible for placing directly with end buyers are treated differently. Such properties are sold with lower discounts but require much more time and resources go shift, something that the entities, under pressure from the supervisor to decrease their share of non-performing assets, cannot afford.

What Fitch does expect is a reduction in the number of new assets being foreclosed by the banks, in line with the improvement in the macroeconomic situation in Spain. “In this environment, it is also fundamental that the banks adopt a new strategy that favours handling doubtful loans through debt restructurings rather than as foreclosures”, said the experts.

Localised bubbles

Besides the banks’ assets, Fitch is observing an overall improvement in the fundamentals of the Spanish real estate market, with prices on the rise. “Despite the recovery, we do not see the risk of a new real estate bubble in Spain arising anytime soon. There is a large supply of homes that still needs to be absorbed. Nevertheless, we are seeing very localised bubbles in premium areas of certain neighbourhoods of Madrid, Barcelona and the Balearic Islands”, they explained.

Original story: Expansión (by Andrés Stumpf)

Translation: Carmel Drake

The CNMV Approves Housers As A RE Platform

9 May 2017 – Cinco Días

Housers markets itself as “the leading real estate investment platform”, which allows users to invest in property in the best areas of large cities for as little as €50. It pays rental income to its users and allows them to benefit from the appreciation in real estate prices when the property they invest in ends up being sold.

It is the largest platform in the sector, with more than 42,000 users, of which around 40% have already invested. Since it began life in April 2015, its users have invested more than €22 million. And, following extensive negotiations with the CNMV, the platform has now received approval from the supervisor chaired by Sebastián Albella. (…).

Sources familiar with the situation say that, since the beginning, Housers has been in contact with the supervisor, chaired in theory by Elvira Rodríguez, and then its conversations intensified with Sebastián Albella. In this way, the problem with Housers was that it joined together fund-raising activity with the promotion of that activity, and that was not permitted by law.

Sources close to the entity explain that the platform has spun off both activities. (…).

As such, Housers Global Properties will now be called Housers Global Properties PFP SL. In an email sent out to its users, the firm explained that since it began operations in April 2015, it has managed to finance 92 properties: 73 in Madrid, 9 in Barcelona, 7 in Valencia, 1 in Marbella and 2 in Palma de Mallorca.

Housers generates a return, known as a dividend, which varies by project, but the historical average amounts to around 3.6%. On the firm’s website, it advertises a return of 6.6% from investing in Zurbano. In addition to the rental income, investors benefit from rises in property prices, amounting to more than 12%, on average.

Sources close to the platform highlight that its mantra is to obtain certainty around its investments, which is why it has to buy homes in central areas, as a way of saving. Its core cities are Madrid, Barcelona, Valencia and Palma de Mallorca. Housers mainly invests in housing and retail premises for rent, as well as in properties for renovation and subsequent sale. (…).

How does the platform earn money? Housers charges a 10% commission on the dividends it pays out, as well as on the proceeds from its property sales. (…).

Original story: Cinco Días

Translation: Carmel Drake

Popular Puts RE Assets Worth €8,000M Up For Sale

20 January 2016 – El País

Banco Popular has made a commitment to investors and analysts to sell around €8,000 million in real estate assets that were foreclosed due to non-payment during the financial crisis. This amount represents approximately 30% of its bad bank, into which the entity led by Ángel Ron has placed the assets that have depreciated by the most and which are provisioned. In this way, the entity may be able to clean up its balance sheet.

Market sources believe that if Banco Popular ends up achieving this objective, it will generate profits of around €200 million, thanks to the recovery of provisions already recognised and the lower operating costs that will result from the disposal of such a large volume of properties. The entity declined to comment on its plans. The proposed real estate operation is seeking to change this negative trend, which reflects the doubts over its future.

The transaction will be divided into two parts: on the one hand, the entity led by Ángel Ron plans to set the branch network a target of selling €4,000 million of properties, which would require it to double the volume of sales recorded in 2014 and last year. The bank will try to take advantage of the improvement in the real estate market in recent months to avoid making losses on its sales.

On the other hand, Popular is negotiating with various real estate and vulture funds, regarding the creation of a special vehicle into which it would place €4,000 million of assets linked to property. The entity has not managed to close any agreement with these investors yet because the discount they are demanding is very high and it is not willing to accept such a reduction.

The perils of the stock exchange

Popular is the subject of numerous rumours about a possible takeover by one of the three largest entities (in Spain), which may be seeking to take advantage of its significant decline on the stock exchange. Nevertheless, “the entity complies fully with the (capital) requirements established by the supervisor”, according to an explanation provided by its managers in December, after figures were published showing that it complied with the ECB’s capital requirements.

Despite that, Popular’s share price has decreased by 23% in the last month and is trading at its lowest level for a year. The market value of its shares on the stock exchange amounts to just over €5,000 million, which makes it an attractive bank given its business model, and its significant penetration in the SMEs and retail markets. Popular’s share price is trading at a five year low.

Popular has always refused to participate in any operation in which it would lose control of the merged entity, but it has also admitted that anyone wishing to acquire the bank will have to pay a high premium to the shareholders. Meanwhile, the market is punishing its market capitalisation: Bankinter, which has assets amounting to around €60,000 million, compared with Popular’s €160,000 million, is worth more than Popular on the stock exchange. Bankinter’s market capitalisation amounts to around €5,400 million, i.e. around €400 million higher than Popular’s.

Original story: El País (by Iñigo de Barrón)

Translation: Carmel Drake

Pimco Urges ECB To Buy Spanish Securitisation Products

14 October 2015 – Expansión

The US investment management company is proposing the creation of a new supra-national entity to acquire securitisation products.

Anniversaries are often a good time to take stock and a year has now passed since the European Central Bank (ECB) announced the launch of its plan to buy securitisation products in the market. The effective acquisitions began in November and so far amount to €13,105 million. Has the effort made by the ECB to support this program been worth it? According to Pimco, the global fixed income giant, the answer is a resounding no.

And not only because the amount acquired so far represents only a tenth of the bond purchase program to date and less than 4% of the public assets, or because the acquisitions have centred on those countries that need the least help in their securitisations markets (Central Europe). All of those factors counts towards to the overall assessment, but Pimco thinks that there is much more to it.

For starters, the US investment management company considers that it is neither the appetite of investors, nor the price that is strangling the issuance of securitisations. The banks have limited liquidity needs at the moment and they can obtain the financing they do need through other simpler instruments, such as bonds or by appealing to the ECB. It is the regulation and the impossibility of freeing up capital with the sale of securitisation products to investors that is causing this issuer drought in Europe. “The banks that need relief for capital requirements are not receiving it under the current regulatory and economic framework for securitisation products”, explains Pimco, in a report published by the company that specialises in this field.

To that it adds the design of the ECB’s plan itself. There is general criticism that the supervisor is being excessively cautious with its purchases: the slowness with which it is analysing each possible purchase and the fear it is showing when it comes to buying assets that may generate problems, have been the commonplace. And the US management company is joining the ever-growing list of critics of the program. They say that purchases are being concentrated in the wrong countries, as well as in the wrong sectors and tranches of the securitisation products, because that is not where the banks need help. Pimco believes that the ECB should focus on buying the most risky tranches of debt issues, because that would help lower prices and free up capital for the banks.

Moreover, the ECB should not only buy the tranches with the highest risk, it should also do so in those countries in which, until now, it has barely made a mark. Pimco points to the periphery of Europe, “where the prices of loans are still high and access to credit is scare”. And by way of example, it cites Spain, the rate of growth in terms of loans is low and the margins being charged on those loans are high. (…)

If power needs to be granted to the European Investment Fund to do make these purchases or a new supra-national entity needs to be created to assume the first losses from the securitisation products acquired, then Pimco insists that that is exactly the action that should be taken.

And all of this would be for the greater good. “If carried out correctly, we think that the European securitisations market could help to cure the continent’s economy, stimulating credit and access to it, especially in the peripheral regions”, concludes the investment management company.

Original story: Expansión (by Inés Abril)

Translation: Carmel Drake