Spanish banks have taken off their balance sheets some 128 billion euros in bad loans related to real estate since January 2015, according to the consultancy firm Debtwire. They have some €47 billion left, 27% of what they accumulated six years ago. The default rate in this period has plummeted from 12.5% to 4.3%, according to the Bank of Spain.
The managers of Spanish financial institutions set themselves the great mission of eliminating toxic assets from their balance sheets. The amount stood at around €175 billion seven years ago, so they still hold 27%. This figure does not include the €51 billion, including loans and real estate, that Spain’s bad bank Sareb absorbed from the banks that received aid between 2012 and 2013.
Amongst the latest largest portfolios put for sale, there are those from Santander, BBVA and CaixaBank; accounting for a nominal amount of around €3,500 million. A common formula used by financial institutions to reduce non-performing assets is to transfer them to so-called servicers, specialised in this task. Haya Real Estate (controlled by Cerberus), Solvia (Intrum), Altamira (doValue), Servihabitat (Lone Star), Aliseda (Blackstone) and the Spanish firm Hipoges stand out among these companies.
But there have also been sales of NPL portfolios, and of pure and simple bricks and mortar assets , in bilateral transactions, with large institutional investors acquiring these assets with price discounts of up to 90% off its nominal value in the most extreme cases. Institutions prefer to pocket a small amount of these loans as long as they do not allocate resources to their collection.In the best cases, they can even release provisions that they had been setting aside, which are directly recorded in the profit and loss account. The NPL ratio has plummeted to one third of the level at the end of 2014 thanks to the measures taken. But even so, the ratio is more than double the 2.1% recorded on average in the sector in Europe.
Original Story: Cinco Dias | Pablo Martín Símon / Ricardo Sobrino
Photo: Photo by Svilen Milev in FreeImages.com
Translation and Edition: Prime Yield