NPL&REO News

Spain’s financial sector has sold €120 billion in toxic assets since 2013

Spain stands out as one of Europe’s most successful story in selling non-performing assets, as its financial sector have already sold about €120 billion from the €200 billion of toxic assets held in its books in 2013. 

The figures were released during the Annual Conference of Spain’s Capital Markets, recently held on Madrid and organized by the European Association of Financial Markets together with the Spanish Banking Association. However, and even though most of the participants agreed the country’s stands out as one success story in selling NPL, they also stressed that there are still €80 billion in NPL to clean up.

That’s why during his intervention, the Governador of Spain’s Central Bank (BdE), Pablo Hernandez de Cos, referred to this issue by asking the banks to intensify their efforts to keep reducing its toxic assets.

Original Story: El Español | María Vega 
Photo: Photo by Victor Iglesias from FreeImages
Edition and Translation: Prime Yield

Sareb looks at the securitization of its credits to developers

SAREB, Spain’s bad bank, is studying new solutions to keep cleaning from its books the toxic assets it inherited from the financial crisis. Securitize part of the Developer’s Credit on its portfolio is one of the solutions on the table, aiming to take advantage of the pull of demand now existing on the market and that in Spain has not had as much supply as in other European countries.

According to SAREB’s Finance & Strategy general-deputy, Iker Beraza, it isn’t the first time this solution is being analysed. «Since 2013 we’ve seen different studies about this theme, but since last year we observed there is more interest (in the market). We’ve been following operations of this sort that have been closed in Portugal and Spain and it seems that the prices can fit in», he explained.

In its intervention during the Annual Capital Market Conference that took place in Madrid, the responsible remembered that SAREB was established seven years ago with the purpose of selling €40 billion in toxic assets and since then has already halved that value. However, there are still other €20 billion to sell and, for that, it will be necessary to explore other ways but without getting out of the radar of larger institutional funds that are «traditional» buyers of this type of assets, such as Blackstone or Cerberus, he explained.

Original Story: El Español | María Vega 
Photo: Sareb Linked In
Edition and Translation: Prime Yield

Haya selected for the management of Sareb’s rental portfolio

Haya Real Estate, one of Spain’s market leader in nonperforming loans (NPL) and real estate asset management, has been selected by the Spanish band bank Sareb for the management of its rental portfolio, comprising more than 3,000 residential and tertiary rented assets.

The portfolio is made up of 80% residential assets and 20% of tertiary properties distributed throughout the Spanish geography. 40% of the assets are located in the Valencian Community, followed by Madrid Community, Castilla-León and Castilla-La Mancha, with 24% of the total portfolio, also, the South of Spain specially Andalusia and the Canary Islands, with 16%.

This new contract provides continuity to the rental management services that Haya has been delivering during the last years for Sareb. Efective from January 1st 2020, this asset management agreement is a strategic business line for Sareb, specially focused in adding value to the rental assets in the mid-term. The contract will last for two years.

This rental management contract is additional to the mandate granted in October 2019 by Sareb to manage the assets of the Esparta project, a €8.4 Bn (net book value NBV) portfolio of loans and REO (Real Estate Owned) up to June 2022.

Original Story: Eje Prime | News 
Photo: Haya Real Estate
Edition: Prime Yield

Spanish banks speed up the sales of bad credit in the end of the year

Spain’s Banks have speed up the sales process of their nonperforming loans (NPL) portfolios in the end of the year. The regulatory watchdogs are increasing the pressure towards an NPL ratio reduction among the country’s banking system.

Since the end of 2019 and up to the beginning of the new year, Spanish banks have sold – or are about to sell – more than €8 billion in NPL. The big news in relation to the last few years is that now these big portfolios aren’t just comprising mortgages only, but also consumer loans without collateral (unsecured) granted to companies and households.

In fact, these days there is more value “unsecured” than “secured” among the latest portfolios sold. Its presence is increasingly bigger in the portfolios, and is no coincidence that the nonperforming rate in the consumer credit is already surpassing the 5% of the general ratio, and in volume, has already reached €5 billion in overdue loans with a double digit annual growth.

The largest porftolios recently sold are those from BBVA, totalling €5 billion in toxic debt of which half correspond to unsecured loans – the largest portfolio with these features to be ever sold in the Spanish market. In specific, the bank sold its Project June, woth more than 300,000 upaid loan contracts, to opportunistic Swedish fund Intrum. On the other hand, in the end of 2019  the bank also sold its €2.5 billion Project Hera, made up largely of loans to SMEs, to Cabot and Carval.

Caixa Bank, for its hand, completed the sale of the €865 million Astún portfolio, comprising unpaid credits to households and corporates. Intrum was the buyer, along with 50% of the Vento portfolio, sold by Banco Sabadell.

Original Story: El Confidencial | Óscar Jimenez
Photo: Photo by Victor Iglesias from FreeImages
Edition: Prime Yield

CarVal and Cabot buy BBVA’s second largest written-off loans portfolio (€2,5 bn)

Following the sale of “Project Juno”, BBVA signed the transfer of a portfolio comprised of written-off loans to small and medium sized enterprises (SMEs) to Cabot and funds managed by CarVal Investors. Named “Project Hera”, this was the banks second largest written-off loans portfolio, with an approximate gross value of €2.1 Bn.

Just a few days before announcing this deal, BBVA had announced another sale of a portfolio of written-off loans (known as “Project Juno”). In this case, the portfolio consisted of loans to consumers with a gross value of €2.5 Bn. The operation was BBVA’s largest sale of a portfolio of written-off loans so far. 

Over the past two years, BBVA has carried out several operations involving the sale of loan portfolios – mostly loans to developers and mortgages. Among them, the sale announced in December 2018 stands out. It was a portfolio of loans (known as (“Ánfora”) with an approximate gross value of €1.2 billion, primarily consisting of mortgages (both doubtful and bad loans). In addition, in June 2018, the bank sold a portfolio of loans to developers with a gross value of €1 billion, called “Sintra”; and in July 2017 it sold another portfolio of loans to developers with a gross value of around €600 million, known as “Jaipur”. 

In November 2017, BBVA announced the transfer of its real estate business in Spain to Cerberus Capital Management, L.P., an operation that was completed in October 2018.

Original Story: El Confidencial | J. Zuloaga
Photo: BBVA
Edition: Prime Yield

Sareb is €34 Bn property hangover, says Bloomberg

Spanish bad bank Sareb’s – whose €34 Bn portfolio of non-performing real estate assets is Europe’s largest, according to investment banking consultancy Evercore -, record of selling assets has been far from stellar.

According to Bloomberg, investors are finding out that a complicated operational structure and conflicting shareholder interests make buying assets from Sareb difficult. Its chief, Jaime Echegoyen, concedes Sareb’s record isn’t exemplary.

«We try to guarantee that the investor clients receive the service they deserve in each one but it’s possible it’s not always like that,» he said in an interview in Madrid.

With Spain’s real estate market losing some steam after half a decade of growth, doubts are mounting about Sareb’s ability to meet its original mission — to pay back by 2027 the more than €50 Bn in capital and debt injected into it by the state and banks.

The bad bank said this week that it’s shaking up its management structure. It plans to appoint a chief executive officer to take over business responsibilities so Echegoyen can focus on corporate issues.

Sareb was created in 2012 when Spain was in the throes of a financial crisis after its real estate market bubble burst. About half way through its 15-year lifespan, it has sold only about a third of the net €51 Bn of defaulted loans and real estate assets it bought at a discount from troubled banks. With the reduction of bad loans tailing off since 2017 and with investors picking off the jewels, Sareb is sitting on more and more unattractive assets.

The entity may have to accept lower returns if it wants to wind-up the operation as planned by 2027, said Elena Iparraguirre, director of financial services ratings at S&P Global Ratings.

Creating Sareb was a condition of Europe’s bailout of Spain’s banks. It allowed lenders that took state aid, such as Bankia SA, to jettison soured assets. With mounting public anger about the bailout, the government persuaded banks such as Santander and CaixaBank SA to buy a 55% stake in Sareb. The government controls the rest.

But Sareb was dealt a difficult hand. It was given no time to build a team, so it relied on structures banks already had in place. Four bank-owned servicer companies divided up and marketed portfolios assigned to them, with commissions depending on the prices they secured.

The servicers were later sold to global investment funds. 

Sareb’s objectives often diverge from those of the servicers. Both need to sell but Sareb can accept losses while the servicers driven by commissions are often unwilling to settle for lower prices.

Many of the assets Sareb took over from banks were grossly overvalued, according to a person with knowledge of the process. In some cases, holes were dug and foundations laid on properties to bump up their categorization and reduce the discount banks had to give Sareb, the person said. Sareb’s team of about 60 people had just a few months to put a price on more than 200,000 assets, with little time for on-site visits.

Sareb also has a conflicting relationship with its shareholding banks. While Sareb mainly reduces its stock one asset at a time, Spain’s banks, buoyed by the country’s economic recovery, sold their portfolios in huge packets at large discounts to funds. In the first half of this year, Spanish banks and funds sold €4.5 Bn of bad loans compared with €388 Mn in process for Sareb, according to data compiled by Evercore.

Yet when Goldman Sachs proposed to Sareb selling off a large portfolio, the idea was voted down by the board, comprised largely of bank representatives worried about flooding the market, people familiar with the operation said. Echegoyen says the deal failed because Sareb couldn’t offer the kind of discount such a large package would demand.

Sareb is trying to address some of its structural issues. It wants to renegotiate its relationship with the servicers to lower fees and take back control of some of the maintenance and legal activities. The bank has opened up the bidding process to other companies to drive competition.

Whatever Sareb’s record, one thing is incontrovertible, said Echegoyen. «We have saved the Spanish financial system,» he said. «It doesn’t mean Sareb was the white knight but we were part of a white knight – perhaps the shield or the lance or the horse

Original Story: Bloomberg | News 
Photo: Sareb (Linked IN)
Edition: Prime Yield

Arrow Global raises €630 million for a pan-European NPL fund

Debt purchaser Arrow Global has announced a fundraising round that amassed nearly €630m from investors for an inaugural pan-European NPL fund.

Arrow Credit Opportunities SCSp and related entities raised €628.5m of third-party commitments into an eight-year, closed-end fund structure, drawing from global investors in diverse geographies and sectors. Combined with Arrow’s own commitments, the fund will draw on €838m in total and the group is targeting €1.5bn of third-party investments before the end of 2020.

 The transformational venture will provide additional asset management and servicing (AMS) revenue, along with fund management fee income, to the group.

 Arrow said that raising the fund is a major achievement in the development of its fund management capabilities and is central to the group’s strategy to accelerate towards a more capital-light model.

 Lee Rochford, group chief executive of Arrow Global, said: «This shows we are successfully executing our strategy to transform the business through the build-out of our fund management capabilities».

 «This represents the completion of a significant initial stage of this strategy and part of our continued drive to engage with capital partners and grow assets under management. I have been impressed with the speed of execution of this fund raising

Original Story: Credit Strategy | Marcel Legouais
Photo: Arrow Global site
Edition: Prime Yield

Direct lenders keen to increase its presence in Spain

Direct lenders are increasingly looking for opportunities in Spain, following private equity firms into the region as they look beyond a crowded Western European mid-market in search of new deals and yield, bankers said.

Ares Management, Bain Capital Credit, BlueBay, CVC Credit Partners and Pemberton are some of the most active direct lenders in Spain, stepping up their efforts significantly in 2019 to find opportunities as private equity firms including Advent, EQT, Portobello and investment firm Investindustrial seek investments in the region.

Although the Spanish market is still dominated by bank lending, with around 80% of deals involving traditional lenders, the number of transactions led by debt funds has increased steadily in the last three years, according to Deloitte’s latest Alternative Lenders Deal Tracker report, quoted by Reuters.

«Spain has always felt like a market which has been less integrated into Europe and in terms of banking has always been more balkanized with strong regional champions trying to protect their turf. But with more international sponsors hunting around, direct lenders and international banks have followed suit,» a capital markets head said.

With eight private debt transactions registered in the first three quarters of this year, the market has already hit 2018’s total deal level, according to Investment bank GCA Altium’s third quarter MidCapMonitor report.

While Spain was a no-go area for investment in the wake of the financial crisis, its economy is now one of the fastest growing in Europe, steadily exceeding the euro zone’s average growth rate over the past few years. In the third quarter of 2019, its unemployment rate decreased to 13.9%, the lowest rate for 11 years.

Despite recent concerns over unrest in Spain’s wealthiest region of Catalonia and political uncertainty, with Spain’s Government fourth election in as many years, the strengthening economy has caught the attention of European private equity sponsors and consequently, international lenders.

Private debt funds have found increasing opportunities to partner with European private equity sponsors — particularly those from the UK — that are looking to back their portfolio companies’ growth strategies in Spain.

While local sponsors have had a preference to utilise their relationships with more conservative Spanish lenders, they are also catching on to the higher leverage on offer from direct lenders.

«There is a trend towards more term loan B and unitranche providers are more noticeable,» a senior banker said.

Unitranche facilities are attractive for borrowers as it means they can raise their leverage to a higher level to pursue their growth strategy.

Direct lenders are willing to offer leverage of 5.5-6.0 times in Spain, compared to the 2.5-3.0 times offered by the more conservative Spanish lenders.

«Generally, local sponsors have not tended to leverage up their portfolio companies. That raises interest from UK sponsors which act more aggressively with higher leverage and would look at alternative debt structures to finance expansion and growth strategies,» the senior banker told to Reuters.

Quality is the key

Most private debt transactions in Spain involve borrowers that are backed by well-established private equity firms.

«People look at the quality of the borrower and the sponsor. If the sponsor is a household name, it will attract established direct lenders,» Norbert Schmitz, managing director at GCA Altium said.

Direct lender Pemberton, the asset manager backed by Legal & General, hit a milestone in Spain, completing over €600m of deals across four transactions in 2019, it announced in October. The deals included financing Advent International’s acquisition of dental clinics Grupo Vitaldent, and InvestIndustrial’s public tender offer for the delisting of chocolate product manufacturer Natra.

Prior to 2019, Pemberton completed its first deal in Spain in 2016 and completed another one in 2018.

In addition to deal flow, Spain is also attractive to direct lenders as financings can often come with a pricing premium compared to Western European deals.

On average, direct lenders can demand a 50bp-100bp premium on transactions in the Spanish market compared with the rest of Western Europe, according to a senior private debt fund manager.

But many are still cautious

Private debt funds are still cautious when lending to Spanish companies as local laws tip the balance towards borrowers and away from lenders and investors.

“We still feel that we need some form of pricing premium to invest there,” a senior private debt manager said.

Despite the pricing premium, it’s not enough to tempt all direct lenders to the region, on a risk-reward basis, the senior private debt manager said.

The economy has largely been immune to Spain’s political woes but its expansion has slowed of late.

Original Story: Reuters | Kerstin Kubanek
Photo: Photo by Victor Iglesias from FreeImages
Edition: Prime Yield

Santander’s profit plunge 35% thanks to Brexit

Santander, Spain’s biggest bank, recorded a 35% drop in its net profits during the first nine-months of the year, after its British subsidiary profits fell 19%.

The Spanish bank recorded a net profit of €3,732 million between January and September, while its British arm earned €828 million. Difficulties in the UK were offset by a 19% increase in profits in Brazil, where Santander earned €2,249 million. The bank’s Brazilian arm remains its most profitable subsidiary.

The company’s American division witnessed the biggest leap in profits, seeing them rise to €619 million, an increase of 27%.

Profits were also up significantly in Mexico, which saw a 14% rise to €659 million and in Portugal where profits surged 12% to €385 million. 

The company’s Spanish wing remains its second most profitable division, seeing profits rise by 3% to €1.185 million. 

Ana Botin, the group’s president, said that the company had maintained «good trends» despite a difficult business environment. She added that diversifying into both European and American markets had helped Santander distinguish itself from competitors.


Original Story:
 The Olive Press | Robert Firth
Photo: Santander Facebook
Edition: Prime Yield

Intrum, Cerberus and Servdebt compete for Sabadell’s €900 million portfolio

Over the last few years, Banco Sabadell has became one of the most active sellers of non-performing loans (NPL) and its real estate collaterals (REO) portfolios in Spain. And, now, its goal is to sell another NPL portfolio worthing €900 million until the end of the year.

The Spanish bank has already named KPMG to be its advisor in the operation of this so-called “Project Vento”, which sales process has already started. And at least three binding offers have already been presented.

Having already acquired other assets from Sabadell, including its servicer platform Solvia, Swedish fund Intrum is one of the competitors. Also very active within the Spanish bad debt market, the US fund Cerberus is other of the interested; having presented its proposal through its credit recovery subsidiary in Spain, Gescobro. The third offer was presented by the Portuguese company Servdebt, specialized in the management and recovery of unpaid credit and, until now, an unknown name for the acquisition of this type of assets in Spain.

According to some market sources, this deal should be completed until the end of November, and it will reflect a discount between 97% (the average discount rate for the sales closing these days) to 95%.

Project Vento is constituted by several unpaid loans that Sabadell has taken out of its balance sheet in recent years and that are provisioned at 100%, which is why its sale would allow the bank to record profits since the losses from this portfolio were already reported in past financial years.

Original Story: Cinco Dias | Angéles Alconada
Photo: Sabadell Site
Translation & Edition: Prime Yield

Haya supports Sareb on implementing its new business model

Haya Real Estate, one of Spain’s market leader in the management of real estate debt and Real Estate Owned (REO) assets, has been selected as the first servicer to support SAREB on the implementation of its new business model under Sareb’s recently announced new Strategic Plan. 

In this context, Haya and Sareb have signed a new servicing agreement to service a portfolio of loans and Real Estate Owned assets amounting to €15 billion assets under management (at Gross Book Value, or GBV) through mid-2022. Haya has been awarded the totality of the auctioned perimeter in a highly competitive tender process. The contract involves no upfront consideration and thus conditions will be those standard in the market for an agreement of this type.

Haya will continue working with Sareb under its existing contract until December 31, 2019 and will support Sareb on the progressive transition to the new business model under a new contract that will be effective from January 1st, 2020. Under this new servicing model, Haya will lead overall commercialization activities and will leverage its in depth understanding of local real estate markets to support Sareb’s new regional strategy. Sareb will assume the direct management of certain positions and will seek to assume certain non-commercial functions as previously anticipated.

Carlos Abad, CEO stated: «We are very proud of having been selected as the first servicer to support SAREB on the implementation of its new business model. We will continue working with the outmost rigor and commitment to help our client reach its business objectives

Original Story: Idealista| Redacción
Photo: Haya Real Estate Site
Edition: Prime Yield

Spanish banks perform more favourably in stress tests

Spanish banks have performed more favorably in this year’s stress tests than last year, Bank of Spain governor Pablo Hernandez de Cos said.

«The results we obtained are, generally speaking, more favorable than last year, since the entities (…) reduced their exposure (to foreclosed assets)» De Cos said.

Spanish lenders are still suffering from the effect of reducing toxic legacy assets left on their balance sheets after the burst of the real estate bubble in 2007, while households are still cutting their own outstanding credit.

Original Story: Reuters| Jesús Aguado
Photo: Banco de España Site
Edition: Prime Yield

NPL sales using securitization should become easier, EBA says

Until recently, it has been difficult for European banks to sell their non-performing loans (NPL) using securitizations, and rules should be put in place to make the process more attractive, according to the European Banking Authority (EBA).

Under current rules, potential buyers of bundles loans face «very high capital requirements» for owning the assets, the EU’s banking watchdog said in opinion sent to other policy makers. On top of that, new regulations governing asset-backed securities are causing «compliance challenges» for bad-debt sellers.

The issues result in «higher funding and transaction costs, depress the price of assets, increase the originating institution’s losses and make securitizations an unattractive funding tool», the bloc’s top banking regulator said.

Over the last years, Europe’s banks have faced pressure form EU regulators to reduce their piles of non-performing loans. The total stock fell to €636 billion at the end of June from more than one trillion euros in 2016, according to the EBA. But levels remain elevated in some member states, including Greece, Cyprus, Portugal and Italy.

Until now, lenders have several options when it comes to getting rid of soured assets. They can keep them and absorb the loss, package and offer them at a discount or securitize them, where loans are bundled and sold in tranches with different levels of risk. While the latter is the most costly and complex kind of transaction, it can appeal to a broad range of investors, leading to better prices for sellers, the EBA said.

Recently, Italy and Greece have launched programs with government guarantees to promote the market for securitizations of non-performing loans (NPL). UniCredit SpA is currently preparing to sell €6.06 billion of soured debt through a securitization. Yet. Overall, the method «remains small compared to outright portfolio sales», the EBA said.

However, any rule changes are unlikely to come quickly, as they would need action from the European Commission and may elicit further debate in the block’s parliament and in national governments.

Original Story: Asset Securitization report |Bloomberg News
Photo: FreeImages.com/Szymon Szymon
Edition: Prime Yield

Haya Real Estate’s AuM increased 14% up to €45.3 billion until June

Haya Real Estate (“Haya”), the Spanish market leader in the management of real estate debt and property assets reached €45.3 billion in Assets under Management (AuMs) at the end of the first half of the year, which represents a 14% increase versus December 2018.

Operating results (adjusted EBITDA) for H1 2019 amounted to €36.4 million (LTM €104.1 million). Including a large portfolio sale of over €1 billion by one of its core clients, completed in July, the adjusted EBITDA for H1 2019 would have been €55 million (LTM €123 million).

The Company has been working on a cost reduction plan since the beginning of 2019 aimed at optimizing its cost structure and creating a sustainable and more efficient business model for the future.

During the first half of 2019, Haya also reported a strong Free Cash Flow of €38.6 million (€120.4 million on an LTM basis), representing a cash conversion above 100% in the period due to the improvement in working capital coming from strong collections in the period. The corporate net debt at the end of June’19 was €427 million, with a proforma net leverage ratio of 3.3x including the large portfolio sold by one of its core clients.

The company’s transaction volumes were €1.7 billion in H1 2019, driving total revenues to €118.6 million (LTM €262.2 million) impacted by lower volume fees due to lower activity in REDs and REOs, partially offset by an increase in management fees and other revenues as a result of the contribution from new contracts (Divarian, BBVA and Apple), and other existing contracts, as well as from the good performance of the Advisory division. Including the portfolio sale contribution, transaction volumes would have been above €2.8 billion in the period (+20% YoY).

Original Story: Haya Real Estate | Press
Photo: HAYA REAL ESTATE SITE
Edition: Prime Yield

Spanish banks already cleaned up €130 billion in NPL from its balance sheets

The financial entities working in Spain have already cleaned up almost € 130 billion in non-performing loans (NPL) from their balance sheets in less than six years, since December 2013 when the NPL ratio totalled its historic peak of 13.61%.

Then, the NPL in the hands of the banks amounted to € 197.045 billion, comparing to the € 67.795 billion recorded in May 2019 – regarding a total credit volume of € 1,448 billion, once again, very much lower than the € 1,202 billion of last May. As a result, the NPL ratio stood at 5.64% in the end of May, hitting its lower since September 2010 and being almost eight percentual points below its peak.

The gradual improvements in the Economy and Employment, together with refinancing granted by the bank and the sales of NPL portfolios to investment funds have contributed to this NPL fall, which could reach the 5.35% by the end of the third trimester of 2019, according to the rating agency Axesor.

Still, the default ratio of real estate and construction companies should be 7.12% in the end of the third trimester, with € 7.541 billion in non-performing assets, adds Axesor. In the first quarter of 2019, this ratio stood at 9.9%, comparing with its high of 37% reached in December 2013.

The credit granted to societies related to real estate should keep falling over the next few months and is expected to hit the € 110.438 million by the end of the third quarter, far bellow the € 0,5 billion recorded in 2009.

Original Story: Expansión | Author: Expansión
Photo: Photo by Pablo Rodríguez from FreeImages
Edition & Translation: Prime Yield

 

Cerberus takes a real estate portfolio from Sabadell for €314 million

US fund Cerberus, through a subsidiary, has reached an agreement with the Spanish bank Sabadell to acquire a real estate portfolio for € 314 million. These assets have a net value of € 342 million, therefore the bank had to provision losses of about € 20 million.

The deal was closed through Cerberus Capital Management, a subsidiary of the US fund; with the bank headed by Josep Oliu keeping the control of a 20% stake in the buyer company, as explained in a note sent to Spain’s Stock Market Comission (CNVM).

This sale joins the macrooperation closed last July, in which the bank sold real estate assets valued in € 9.1 billion. These portfolios sold have a net nominal value of € 3.9 billion.

Original Story: EJE Prime | Author: News
Photo: Sabadell site
Edition & Translation: Prime Yield

Spanish banks waiting EU’s Court decision on whether they be forced to repay billions

 

Spanish banks are awaiting a key legal opinion on whether they should be forced to pay billions of euros in compensation for the way they sold a certain type of mortgage.

Advocate General Maciej Szpunar of the EU Court of Justice is set to publish a non-binding opinion on whether the lenders misled customers by failing to provide sufficient information when selling loans tied to the Bank of Spain’s Mortgage Loan Reference Index, or IRPH. The court’s rulings usually come four to six months later and follow such advice in a majority of cases.

The case has drawn parallels with the U.K.’s payment protection insurance scandal, which resulted in tens of billions of euros of compensation to customers. The Spanish banks could be ordered to pay clients as much as € 44 billion, Goldman Sachs Group Inc. estimated.

«In a worst-case scenario, this is a very serious problem,» said Pablo Manzano, vice president of the global financial institutions group at credit-rating agency DBRS. «The intensity could be less than PPI or it could be more.»

A Million Loans

About € 108 billion of home loans linked to IRPH, marketed as an alternative to the Euribor benchmark, were sold since 1999, according to DBRS. Some 1 million customers in Spain bought them, paying an average of 25,000 euros more than those who took Euribor-linked loans, according to an estimate by the Association of Financial Users (Asufin).

Several banks have said they’re optimistic that the EU’s top court will uphold a 2017 ruling by Spain’s Supreme Court, which concluded the methods used to sell IRPH weren’t abusive. Still, Spanish banks bore the burnt of a ruling from the European court as recently as 2016, when it ordered them to pay back billions of euros for imposing so-called mortgage floors — clauses in loan contracts that prevented borrowing costs from falling in line with benchmark rates.

In DBRS’s Manzano opinion, the European court is likely to side with banks this time, especially since a ruling against them could open up claims over other types of mortgages across the EU where the rate calculation wasn’t sufficiently explained.

Europe’s highest court is reviewing a case referred to it by a Barcelona tribunal. The waters have been muddied somewhat by a report issued by the European Commission’s legal team in September 2018 that said Spanish judges should be allowed to nullify contracts and offer customers the opportunity to switch to obtain better rates.

Banks haven’t reported the full extent of their exposure to potential claims, only publishing their outstanding IRPH-linked mortgages. CaixaBank SA has the most with € 6.4 billion as of June 30. That’s followed by Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA with € 4.3 billion and € 3.1 billion respectively.

Original Story: Bloomberg | Author: Charlie Devereux 
Photo: Photo by Philipp K from Free Images
Edition: Prime Yield

SAREB is looking for alternative servicers to manage its portfolio

Spain’s bad bank has recently put in the market  a contract for the management of €34 billion in non-performing loans (NPL) and real estate assets (REO) that it still has in its portfolio, according to El Confidencial.

The biddings presented by the four major servicers failed to comply SAREB’s targets, making the entity to contact other specialezed companies such as Hipoges, Finsolutia or Copernicus. With this, the bad bank has also sent a message to Haya Real Estatem Servihabitat, Solvia and Altamira, that they should improve their offers in order to they are not left without contracts.

In this way, SAREB is also analysing the possibility of splitting some parts of tis portfolios by geographic areas or by keeping two managers by are in order to simplify the management.

Original Story:EJE Prime
Photo: Sareb Linked In
Translation & Edition:Prime Yield

Castlelake and Urbania take up Unicaja’s toxic asset

Castlelake and Urbania have bought toxic assets from Unicaja. The US investment fund and the real estate group have acquired the lands from a portfolio that included problematic assets and mortgages that were paid-up to date. The mortgage part was bought by Mediterráneo Vida.

Among the lands bought by Urbania there is a plot located in Sánchéz Blanca area, in Malaga, for which are planned 2,000 dwellings, according to El Confidencial.

These assets were part of a portfolio valued in €830 millions, that the bank as finally successfully sold for €949 million, getting capital gains of €17 millions.

Original Story:EJE Prime 
Photo: Unicaja banco site
Translation & Edition:Prime Yield

Spain’s credit supply shows to be less expansionary

The recently published Survey of Banking Loans in Spain and Monetary Union shows a less expansionary evolution in the supply of credit in Q2 2019 compared to previous quarters. Specifically, the criteria for the approval of credit to households in Spain have been tightened.

In addition, the demand for credit in Spain has also slowed. The entities surveyed believe that regulatory measures have led to a certain tightening of the credit supply.

For Bankinter analysis team, the tightening of the criteria for the approval of credit to households is consistent because, on the one hand, the strong growth in credit for consumption which has been observed in recent years and, on the hand, with the metrics for the concession of mortgage credit which already had the highest Loan-to-Value (LTV) in recent years, much higher than in the years of the housing bubble.

Original Story:The Corner 
Photo: Xexo Xeperti/FreeImages.com
Edition:Prime Yield

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