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.
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