Abanca is removing new non-performing assets from its balance sheet. The bank will transfer around €140 million in two separate operations, including healthy loans that have suffered some incidence in the last year and other financing with defaults. On the one hand, the bank has sold €60 million in refinanced and restructured mortgages (reperforming in the jargon) to the American fund Balbec Capital. In Spain, the transaction is a continuation of the Xallas project, in which it transferred to the same fund a portfolio of similar assets with a total gross nominal value of almost €80 million.

In Portugal, it is also finalising the transfer of a further €78 million of unsecured NPL to Servdebt Capital Asset Management, an Iberian asset management and recovery company. This is the so-called Gaia project or operation.

Some twenty disposals

So far this year, the Bank has also completed the placement of a €60 million portfolio of unsecured NPL to Poland’s Kruk, in the Ezaro portfolio. In recent years it has completed around 20 similar sales to KKR, EOS Spain and the US fund CarVal Investors, among others.

Abanca has been particularly active in the reperforming credit segment, completing five transactions in just four years. This is an asset class that is becoming increasingly important in a market dominated by unsecured NPL, now that banks have moved on from the massive real estate outflow.

The portfolio transferred to Balbec comprises outstanding mortgages with private individuals secured on residential properties throughout Spain. It has been structured for sale by securitisation, with the bank retaining the management of the ‘healthy’ loans and transferring them to a servicer when they become non-performing.

The segregation of non-performing assets and their subsequent sale is part of the routine management of institutions to improve the quality of the balance sheet and to transfer debt collection to specialised companies, thus freeing up their teams from these functions.

In the case of Abanca, the clean-up of the balance sheet has gone hand in hand with the integration of other banks during its acquisition spree. The latest was Eurobic, which was completed last July. But since Banesco entered Spain in 2012 with the purchase of Banco Etcheverría and the acquisition of Novagalicia Banco (now Abanca), the group has added Popular Servicios Financieros, Deutsche Bank’s Portuguese operations, the Spanish operations of Caixa Geral de Depósitos and Novo Banco, Bankoa and Targobank.

At the end of September, its NPL ratio was limited to 2.6%, at 1,312 million, with provisions of 1,024.9 million and 78.1% of impaired assets. If Targobank and Eurobic are excluded, the ratio is even lower at 2.3%.

Its exposure to foreclosed assets is also very limited, at 433.13 million at the end of September, barely 0.2% of the group’s balance sheet and backed by provisions covering 63.3% of the risk.

Original Story: El Economista | Author: Eva Contreras
Edition and translation: Prime Yield