Tag: TSB

Solvia: Sabadell Puts its Real Estate Subsidiary Up For Sale

17 October 2018 – El País

Sabadell is going to listen to offers from several real estate vulture funds that are interested in acquiring its subsidiary Solvia, the manager of its properties. The entity, which declined to comment, has now entrusted the sales process to an investment bank. In the summer, Jaime Guardiola, CEO of Sabadell, justified holding onto Solvia due to “the great contribution it makes to the bank”, but now he is taking a step towards selling it. Sources in the sector indicate that Sabadell wants to strengthen itself and take advantage of the good climate still being enjoyed in the real estate market.

The banks are getting rid of properties before the booming market deflates. They are selling not only portfolios, but also the companies that specialise in the management of those real estate assets, known in the sector as servicers. Until now, it was typical for the banks to include their servicers in the package of asset sales: that is what CaixaBank did with Servihabitat and BBVA with Anida.

But, Sabadell wanted to get more mileage out of its subsidiary and so decided not to sell Solvia when it divested around €12.2 billion of its properties to Axactor, Cerberus, Deutsche Bank and Carval. Nevertheless, Sabadell has now taken the definitive step and is open to offers from the interested vulture funds. According to sources in the market, the interested parties include Cerberus and Oaktree.

148,000 assets under management

Based on data as at May 2018, Solvia is one of the leaders in the real estate services market in Spain, with a portfolio of 148,000 units in assets under management, whose value exceeds €31 billion, according to the entity. In a report from Goldman Sachs, Sabadell indicates that Solvia’s annual profit amounts to €40 million.

The company has extensive experience in the marketing of new build developments, given that it has placed more than 10,000 homes in new developments on the market since 2015. At the moment, Solvia has 55 developments up for sale. In terms of rental, as of October, the firm was managing 32,000 assets, of which 74% belong to Sabadell. Solvia also works with other clients, including Sareb.

The report from Goldman Sachs noted that Sabadell could sell Solvia as a way of raising its capital ratios, with little detriment to its income statement.

Market sources agree with these arguments to explain the step taken by Sabadell. On the one hand, as the European Central Bank has indicated, entities must accelerate the sale of all businesses relating to the real estate sector. The banks are aware that times of lower economic growth will come and understand the importance of taking advantage of the appetite that the large international funds still have for Spanish property.

On the other hand, the sale of Solvia will also result in cost savings, a reduction in the workforce and, above all, lower capital consumption. In the last quarter, between March and June, Sabadell’s capital ratio decreased by one point, from 12% to 11% for its CET 1 fully loaded capital ratio (the highest quality indicator). The limit on the basis of which the ECB applies severe measures is 10.5%.

This decrease was due to the problems that Sabadell has been facing with its British subsidiary TSB, which was left without a service for weeks. Between March and June, the bank lost €138 million in provisions against real estate portfolios and the problems at TSB.

Original story: El País (by Íñigo de Barrón)

Translation: Carmel Drake

Sabadell Sacrifices Profits to Clean Up its Balance Sheet & Resolve the TSB Crisis

27 July 2018 – Expansión

Banco Sabadell has decided to sacrifice all of the profit that it obtained in the last quarter to clean up its balance sheet and leave behind the impact of the sale of its real estate portfolios and the complex IT integration of TSB.

The entity chaired by Josep Oliu earned €120.6 million during the first half of the year, a figure that represents a decrease of 67.2% with respect to the same period last year (€317.7 million) as a result of having recognised impairments amounting to €806 million. Nevertheless, if we ignore those extraordinary effects, the bank’s recurring net profit grew by 24.4% to €456.8 million.

The entity decided to take a hit on the income statement for the second quarter with a provision amounting to €177 million resulting from the macro sale operation of a real estate portfolio worth €12.2 billion and which was formalised in July, in other words, in the third quarter. In parallel, it decided to recognise a provision amounting to €92.4 million to deal with future compensation payments to customers of its British subsidiary, TSB, who were affected by problems caused by the connection of a new IT platform developed by Sabadell.

With this measure, the bank wants to shelve the technological crisis that it suffered in the United Kingdom and also leave its balance sheet almost completely free of the toxic assets that it accumulated during the economic crisis. Specifically, during the first six months of 2018, Sabadell decreased its problem assets by €7.012 billion, and by €9.547 billion during the last twelve months. Now, the problem balance amounts to €7.911 billion, of which €6.669 billion are doubtful debts of all kind (not only real estate) and €1.242 billion are foreclosed properties. Thus, the ratio of net problem assets over total assets amounts to 1.7%. The default ratio following the portfolio sales amounts to 4.5%.

As at 30 June 2018, the bank’s fully loaded CET1 capital ratio amounted to 11%, although that will rise to 11.2% following the transfer of the majority of the toxic assets, closed in July.

The bank led by Jaime Guardiola has sold the bulk of its non-performing and foreclosed loans to Cerberus, with whom it is going to create a joint venture in which the fund will hold an 80% stake. The entity has also sold portfolios to Deutsche Bank and to Carval Investors. Solvia has not been included in any of those transactions and will continue to be fully owned by Sabadell.

Between January and June, Sabadell increased the volume of its live loan book by 3.7% thanks to a boost from SMEs and mortgages to individuals in Spain. Customer funds increased by 2.8% YoY driven by demand deposit accounts, which amounted to €105.4 billion. Off-balance sheet funds also grew, by 1.2%, during the quarter, primarily due to investment funds.

During the first half of the year, Sabadell’s interest margin remained stable, given that the entity earned practically the same amount as it did in the six months to June 2017 (€1.81 billion). The bank has been affected by exchange differences and a reduction in results from financial operations (-51%); by contrast, fee income grew by 6%. Thus, the gross margin fell by 8.8% to €2.631 billion.

The reaction of investors to these results has been negative. Sabadell’s share price fell by 2.99%, the third largest drop on the Ibex, to €1.37. So far this year, the bank’s share price has depreciated by more than 14%.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Sabadell Rents 4,800m2 Of Space From Axiare In Sant Cugats

21 July 2017 – Expansión 

Banco Sabadell is expanding its facilities in Sant Cugat (Barcelona) with the aim of accommodating the growth of its IT services and addressing the challenge associated with the technological integration of the British bank TSB.

The entity chaired by Josep Oliu has leased 4,845 m2 from the Socimi Axiare Patrimonio, owner of the ParCugat building, where it will occupy half of the available floors. Sabadell will transfer 350 employees to the property, of which 40% are employed by the bank and 60% are employed by its subsidiary Sabadell Information Systems (Sabis), the bank’s software factory, which its controls 100%.

Some of these employees used to work in the historical building in the centre of the city of Sabadell (Barcelona), where now, instead of 1,900 people, there will be 1,600 employees, dedicated to both technological functions (800 people) and other departments within the entity.

Following this operation, Sabadell will have three corporate buildings in Sant Cugat. In addition to its main headquarters, known as the CBS building, it will have the building leased from Axiare and Colonial’s offices, which it started leasing last year – and where 800 employees work – to centralise the TSB integration process and the creation of the British bank’s new technological platform, known as Proteo4UK.

In total, Sabadell has assigned a team of 1,500 people to “unplug” TSB from Lloyds’ IT system and connect it to its own network. The process is being led by Sabis, although several technology partners are participating in it, such as Accenture, Everis, Indra, GFT, IBM, HP and BT.

The big bang, i.e. the date on which the integration will culminate, is scheduled for the weekend of 4-5 November. The success of the operation is key for Sabadell, given that Lloyds will pay it GBP 450 million to finance the costs associated with the new platform.

Original story: Expansión (by S. Saborit and M. Anglés)

Translation: Carmel Drake

 

Sabadell & Bankia Lead Reductions In Default Rates

17 May 2016 – Expansión

Banco Sabadell and Bankia are the entities that have reduced their default rates by the most in the last year, by 4.18 points and 2.12 points, respectively, according to Europa Press. The entity chaired by Josep Oliu recorded a default rate of 7.5% during the first quarter of the year, which represents a decrease of 4.18 points. Most of that decrease came as the result of the acquisition of the British bank TSB, which has lower default rates than Sabadell.

Excluding the effect of that acquisition, Sabadell reduced its default rate by 2.23 points over the last 12 months (between March 2015 and March 2016) to 9.45%.

It was followed by Bankia, which has decreased its doubtful debt ratio by 2.12 points to 10.5%, in a proportion that is almost identical to CaixaBank, which reduced its default rate to 7.6%, down by 2.11 points.

Nevertheless, the entity with the best ratio in the sector is Bankinter (3.95%). The behaviour of the other large entities has been more modest, with decreases of less than one point in the last year. Santander reduced its rate by 0.89 points to 6.36%; BBVA’s rate rose by half a point from 5.9% to 6.4%, penalised by its acquisition of CatalunyaBanc. Popular barely managed to reduce its default rate by 0.64 points and continues to record the highest ratio in the large bank sector, with 12.68%.

Original story: Expansión

Translation: Carmel Drake

Sabadell Puts €1,300M NPL Portfolio Up For Sale

20 April 2016 – Expansión

Sabadell has become the most determined Spanish entity when it comes to trying to clean up its balance sheet. The entity chaired by Josep Oliu (pictured above) has two portfolios up for sale through which it hopes to sell off €1,300 million of non-performing assets. Moreover, it may soon add another €1,700 million portfolio, if a large deal that the entity is currently preparing eventually goes up for sale. In total, €3,000 million, of which €2,200 million comprises doubtful loans linked to real estate developments, and which represent around one sixth of its doubtful assets in Spain. The remainder, €800 million, relate to non-performing consumer loans.

The latest divestment to come onto the market is Project Pirene, advised by KPMG, containing €460 million of problem assets linked to property developers, according to sources consulted at international funds. Unlike some of its recent operations, this one originates from Sabadell’s own business, and not from CAM, Caixa Penedès or Banco Gallego.

This operation combines Project Corus, with €800 million non-performing consumer loans; and Project Normandy, under assessment, with €1,700 million non-performing real estate loans, according to El Confidencial.

The Catalan group hopes to close the first two operations within the next two months, so that they may be accounted for in its financial statements for the first half of the year. Meanwhile, Project Normandy may be delayed somewhat due to its large size. In fact, the operation would be one of the largest seen in Spain in recent years. The largest, Project Big Bang, containing €4,800 million in foreclosed assets, was suspended by Bankia due to its complexity and the large discounts being demanded by the funds.

Sabadell was one of the Spanish entities that reduced its default rate by the most during 2015. Following the purchase of the British bank TSB, its default rate fell by almost five percentage points. If we exclude that acquisition, the rate fell by almost three percentage points, from 12.74% to 9.86%. In total, the entity manages €21,500 million of problem assets, with a coverage ratio of 53% for its doubtful debts and of 44% for its real estate assets.

Besides these operations launched by Sabadell, only a handful of other entities have decided to divest their problem assets so far in 2016, namely Cajamar, Bankia and BBVA. Popular announced that it would be very active, but it has not yet put any portfolios on the market.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake