Tag: toxic loans

Sabadell Could Receive up to €400M for Solvia

24 October 2018 – Expansión

Change of tack for Sabadell. The bank has put Solvia up for sale, its real estate subsidiary, which it owns in its entirety, to try to earn €400 million, according to sources familiar with the process. Sabadell has awarded the mandate to sound out offers to Alantra, although other investment banks may also be advising the entity. Sources at the bank preferred not to comment in this regard.

Sabadell has activated the sale of Solvia three months after cleaning up its balance sheet to remove €11.5 billion in toxic assets. At that time, it decided to go against the trend in the sector and not divest its real estate platform, taking advantage of the sale of the portfolios.

Sources at the entity defend that the real estate platform holds significant latent value.

Other sources in the sector estimate that a reasonable price that the bank could obtain for divesting this asset is €200 million. That figure is equivalent to four times its EBITDA, a reference that the market has used for the sale of the property management arms of Servihabitat (CaixaBank) and Aliseda (Popular).

Sabadell’s strategy of separating the sale of the two portfolios from that of Solvia is to maximise revenues.

As is typical in these types of transactions, the final price will depend on whether the management of future toxic loans, known in the financial jargon as NPLs, are included in the sale.

Appetite

Alantra has already received interest from three opportunistic funds. One of the best positioned is Cerberus, according to various financial sources. In fact, the US fund acquired two large portfolios of foreclosed properties (Challenger and Coliseum) from Sabadell in the summer, with a combined gross value of €9.1 billion.

The US fund’s Spanish platform, Haya Real Estate, could gain muscle with the operation to accelerate its plans to debut on the stock market. And it could also benefit from important synergies, given that it already manages almost €40 billion in assets.

Sources at the sector also point to Intrum, the new brand that the Norwegian fund Lindorff is operating under, following its merger with the Swedish firm Intrum Justitia, and a new international player that wants to enter the European market with this operation, whose name has not been revealed.

In theory, the deadline for firm bids for Solvia, through binding offers, will close this month. Nevertheless, Sabadell is already holding very advanced negotiations with a single fund to sign the sale of Solvia, according to sources in the know. Sabadell has been weighing up the sale of its real estate platform for months. Jaime Guardiola, CEO of the bank, admitted at the beginning of the year that it was considering putting it on the market in light of the appetite from the funds for real estate and these platforms.

Solvia manages 148,000 assets, with a value of more than €30 billion. Since 2015, the company has focused on the marketing of new build developments and has put more than 10,000 homes on the market. It has 36 franchises and 18 own centres, which together make 54 offices located all over Spain (…).

Original story: Expansión (by R. Sampedro & S. Saborit)

Translation: Carmel Drake

The Keys To Banco Popular’s Much Needed Recovery

19 January 2017 – Expansión

Analysts at Citi think that Banco Popular’s core business, which focuses on SMEs and corporates, is one of the most profitable in the Spanish banking sector. That is according to a recent report about the entity (still chaired by Ángel Ron), which anticipates a potential increase in the bank’s share price of up to 40%.

But the strength of Popular’s underlying business has been eclipsed for years by the problem assets that it accumulated during the real estate bubble. So much so that the analysts at the US bank consider that the entity’s capacity to drain its toxic real estate is its “greatest challenge” over the next few years.

“On the basis of our analysis, Popular has the largest volume of toxic assets of any of its peers, by far: in fact, it has three times as many if we take into account their relative size to the total volume of assets (18% compared to 6%)”, say sources at Citi. The analysts anticipate a series of difficulties for the bank when it comes to reducing its level of problem assets, which they consider represent a real “pain in the neck” for the entity.

In their report, Citi’s analysts assess the three ways through which Popular is seeking to rechannel its problem assets. In essence, the three pillars on which its recovery will be based are: the capacity to recover toxic credits, the sale of foreclosed assets and the effective management of Aliseda.

Cut its toxic loan balance in half

Regarding the toxic loans (non-performing loans or NPLs), Citi predict that the Directors of Banco Popular will manage to reduce the total volume from 17.1% of the total portfolio to just 8.9%. This reduction will be based on a lower inflow of gross credit, a higher recovery rate of doubtful loans and a more aggressive path of divestment than the one undertaken to date.

In terms of its foreclosed assets, the entity chaired by Ángel Ron (who will soon hand over the leadership role to Emilio Saracho) will have several specialist tools for developing, managing and selling those assets: Aliseda, Aliseda SGI, commercial agreements with third parties and its own network of bank branches. Citi’s forecast estimates that by 2020, Popular will have reduced its volume of foreclosed assets by around €8,000 million, i.e. to almost half of its current balance (which stands at €15,000 million) and excluding the almost €6,000 million that are going to be separated out into a different vehicle.

In terms of Aliseda SGI (in which Kennedy Wilson and Värde Partners own a 51% stake), which manages around €23,000 million in assets, its future is linked to what Popular decides to do in the end with some of the real estate assets that it is planning to segregate out into a specialist vehicle. “We estimate that it will take Popular nine years to free itself from all of its problem assets, including future flows from loans to property developers and mortgages in the non-performing category and relating to foreclosed assets”, they explain. In the opinion of Citi’s analysts, a spin-off operation involving the segregation of the assets managed by Aliseda would have three main benefits:

“It would accelerate the divestment of foreclosed assets…by one or two years; it would allow the underlying profitability of the bank’s business to surface sooner (due to lower financing and management costs) and it would free up around €4,000 million in theoretical provisions (40-50 basis points of regulatory capital)”.

Original story: Expansión (by Nicolás M. Sarriés)

Translation: Carmel Drake

Bankia, Sabadell & CaixaBank Have Sold €17,000M Of Problem Assets

27 April 2016 – Expansión

Spain’s banks still need to get rid of €350,000 million of problem assets from their balance sheets, despite having already divested €65,000 million over the last five years. The leaders in the disposal of non-core assets so far have been CaixaBank, Sabadell and Bankia, although experts indicate that divestment of toxic loans and foreclosed assets may taken another ten more years.

That was the view of the Heads of Advisory for Financial Divestments at KPMG, Deloitte, N+1 and PwC. “After ten years in this market, I think that we still have another ten years worth of divestments ahead. This market is here to stay”, said Joel Grau yesterday, Partner and Co-founder of N+1’s Corporate Portfolio Advisors, at an event organised by Europa Press and Servihabitat.

In recent times, the rate of asset sales has amounted to between €16,000 million and €22,000 million per year and experts at KPMG predict that this year will be the second best in the history of the sector in Spain: “We expect to see an increase of 7% in terms of portfolio sales with respect to 2015, to reach €19,500 million, with the weight of mortgage portfolios and foreclosed assets accounting for 49% of the total”, said Amparo Solía, the Partner responsible for Corporate in the Finance and Real Estate Sector at KPMG, the consultancy firm that participates in half of all operations.

Of that figure of almost €20,000 million, there are currently almost €15,000 million in the market, according to Jaime Bergaz, the Partner responsible for Deals – Financial Sector at PwC. Of that amount, around half relates to portfolios with a real estate component: debt to property developers, mortgages and foreclosed assets.

Once again this year, the entities that are proving to be most active in the divestment market are Sabadell, CaixaBank and Bankia. According to KPMG, those three financial groups have sold off problem assets amounting to €17,000 million in the last three years, which represents 30% of all of the assets sold by Spain’s banks.

Bankia is the leader in the ranking, with €9,000 million sold in the last three years, according to the different consultancy firms, followed by Sabadell, with €4,500 million and CaixaBank, with €4,000 million. (…).

Sareb, BMN, Santander and BBVA have almost sold portfolios worth more than €2,000 million in the last three years.

In addition, Sabadell currently has two portfolios up for sale worth €1,300 million and is studying the possibility of bringing a third onto the market worth €1,700 million. Meanwhile, CaixaBank has an operation underway involving a portfolio of doubtful debts to property developers, worth €800 million; and Bankia is considering launching the sale of a package of doubtful mortgages. Moreover, Cajamar is also proving very active; Abanca has a portfolio of NPLs up for sale; and Popular is expected to be involved in some major deals during the second half of the year.

Solía, from KPMG and Grau, from N+1, predict a higher volume of portfolio sales in 2017, due to the new provisioning circular and the banks’ need to increase their returns.

Ahead of this improvement, funds are already managing 80% of the banks’ problem assets, through platforms that they have been buying up in recent years. Investors paid €4,000 million for the servicers and have absorbed 3,200 jobs from the financial institutions.

The acquired platforms include Altamira, in which Apollo owns an 85% stake; Aliseda, in which Värde and Kennedy Wilson hold a 51% stake; Servihabitat, of which 51% is controlled by TPG; Haya Real Estate, which Cerberus acquired from Bankia; and Aktua, which Centerbridge bought from Banesto and is now selling to Lindorff. (…).

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake