Spain’s Caixabank adequate provisions to face potential future losses given the current market uncertainty, the bank’s Chief Executive Officer Gonzalo Gortazar said.

“At the end of 2021, the unallocated amount of the pandemic-related provision is more than €1.4 billion, so we are comfortable with the existing cushion to absorb any losses that might happen,” Gortazar told shareholders during the bank’s annual meeting.

Caixabank’s pandemic-related provisions fell by around a fifth in 2021 compared to the previous year, boosting the lender’s recurrent net profit by more than 70%.

The Bank of Spain is monitoring the evolution of state-backed loans granted in the pandemic as repayment freezes are lifted and indirect impacts from the Ukraine war show up in credit portfolios.

The central bank’s Director General for Supervision Mercedes Olano said that she expected an increase in bad loans but that should be manageable as Spanish banks’ exposure to Russia was limited.

Gortazar told investors that Caixabank was confident that credit quality this year would remain at “very adequate” levels.

At the end of December, the bank’s non-performing loans (NPL) accounted for 3.6% of total lending, in line with the previous quarter.

Shareholders are expected to approve a gross cash dividend of 0.1463 euros per share against 2021 earnings, representing a 50% pay-out. 

Caixabank aims for a dividend cash pay-out policy of between 50-60% of 2022 consolidated earnings.Investors will also be asked to approve a reduction of the group’s outstanding share capital of up to 10%.

Original story: Reuters | Jesus Aguado 
Photo: CaixaBank website
Edition: Prime Yield

The Bank of Spain told lenders to adequately monitor credit risks of some of their customers most exposed to the economic impact from Russia’s invasion of Ukraine and urged banks not to release provisions given the current uncertainty.

“In view of the new shock, we will have to closely monitor the effects of the crisis on institutions and their borrowers,” Bank of Spain Governor Pablo Hernandez de Cos said in the presentation of the central bank’s supervisory report.

He said lenders needed to maintain a high degree of prudence, with “appropriate and early recognition of the associated risks, in order to preserve confidence in the sector and to facilitate the continued flow of credit to the economy”.

Last April 5^th, the central bank lowered its economic growth forecasts for 2022 and 2023.  

Deputy Governor Margarita Delgado warned in the report that “it is important that lenders…do not release provisions until uncertainties dissipate.”  

Spanish banks such as Santander and Sabadell have recently started to release provisions, mainly in the United States and Britain.

Although Spanish lenders have little exposure to Russian credit, estimated at just above €700 million by the central bank, they fear an indirect impact of high energy prices on some of their customers. 

Analysts have also warned that the conflict could delay interest rate hikes in the long run, and Delgado said it was “difficult to establish clear scenarios for the evolution of interest rates”.

She saw a more limited scope for further domestic mergers but growing chances of cross-border deals in Europe. The number of significant lenders in Spain has dropped to 10 from 55 before the 2008 financial crisis.

Despite a significant rise in property prices in 2021, De Cos did not see any evidence of a “clear overheating in the Spanish real estate sector”, but said the bank would closely monitor its performance. Spain’s property price index rose 6.4% in the fourth quarter, the biggest increase since early 2019.

Original story: Reuters | Jesus Aguado 
Photo: Bank of Spain website
Edition: Prime Yield

Spain’s state rescue fund FROB has increased its stake in the country’s “bad bank” Sareb to more than 50%, in line with a European Union order to count its liabilities as public debt.

FROB said it had bought a 4.24% stake in Sareb, set up in 2012 to take on bad loans after the financial crisis, to raise its holding to 50.14%. No price was given but several sources with knowledge of the matter said it was merely symbolic.

The move comes after the government in January approved a legal framework allowing FROB to surpass the 50% threshold in Sareb following the EU order.

FROB didn’t say which banks had sold their stakes but a source at Sareb said some smaller holders, such as Bankinter, had tendered their stakes. Bankinter declined comment.

Santander remains the biggest private shareholder with a 22.2% stake, followed by Caixabank with 12.2%.

Several Spanish banks have been planning to sell their stakes in Sareb, which has struggled since its creation as a slump in real estate prices has depressed the value of loans and assets, but most had retained their holdings for tax reasons.

After selling 17.1 billion euros of all debt issued, Sareb still holds 33.7 billion euros in senior debt.

Original story: Reuters | Jesús Aguado 
Photo: Sareb Linked IN
Edition: Prime Yield

The Spanish banks are monitoring about €50 billion in loans guaranteed by the Official Credit Institute (ICO) granted to companies from problematic sectors, for fear of non-payment. This is the equivalent to one out of every two euros lent by the sector with the public guarantee, according to data handled by the consultancy firm Axis Corporate.

The firm points out that 50% of the total financing provided with ICO guarantees is concentrated in five economic sectors that, by their nature, “have been significantly affected by the pandemic”. 

Specifically, of the €50 billion, €14.8 billion come from the tourism, leisure and culture sector, €10.7 billion from the construction and infrastructure area, €8.8 billion from business and professional services, €8.2 billion from capital and industrial goods and €7.6 billion from food and beverage distribution.

The data compiled by Axis Corporate warns that part of these credits “are deteriorating quite rapidly”. Thus, it points out that in the sectors most affected by the pandemic there has been an increase in the rate of doubtful credit of 30% compared to the previous half-year (with data to half of 2021) and expects this growth to continue to increase in the coming months, which would explain why the Bank of Spain has been reluctant to financial institutions to release provisions.

In addition, Axis Corporate has found that more than 40% of the companies that have requested ICO guarantees to meet their obligations required changes of term and/or grace period, as they were unable to comply with them, and the payment time in the private sector “has grown significantly” throughout 2021, to stand at over 90 days.

“Although this delay in payment has become commonplace in our economy, 27% of companies see the viability of their business compromised if payment delays become structural. Another particularly worrying figure is found in the ratio of non-payment of invoices, which has risen from 3.1% in 2019 to 5.4% in 2020 and 4.8% in 2021, which, if not corrected, would mean an increase in the non-fulfilment of companies’ financial obligations”, the consultancy firm warned.

Axis warns that this situation is aggravated by the current economic situation, with inflation soaring, energy costs at record highs and the war in Ukraine.

Although the government is planning to make available to the most affected sectors another line of guarantees amounting to €10 billion of the €36 billion still available from the line of guarantees of the coronavirus, as well as extending the maturity of loans guaranteed by the ICO and the grace period for the most affected sectors, the firm argues that, “if there are no drastic changes in the economic environment, these measures may only succeed in delaying beyond the second quarter of 2022 the massive influx of defaults”.

Original story: Europa Press| Europa Press | 
Photo:Photo by Pablo Rodríguez on FreeImages
Translation and edition: Prime Yield

Spain is planning a consumer protection authority which aims to ensure banks and other financial institutions meet obligations towards customers, responding to complaints of unfair mortgage lending, and financial exclusion, particularly of the elderly.

Economy Minister Nadia Calvino acknowledged a shift towards online banking which accelerated during the pandemic had left part of the population more exposed to financial exclusion.

“(Financial services) is the area with the highest number of complaints from citizens, and one that has a very high degree of litigation,” Calvino told a media briefing.

The new authority, whose creation is set out in a draft bill, will bring together functions previously performed by the Bank of Spain, supervisor CNMV and the Directorate General for Insurance and Pension Funds.

It will take on those bodies’ responsibilities in the regulation of financial entities, investment companies, payment companies, and so-called fintechs or providers of cryptoassets.

In Spain, codes of good practice have had mixed success in the past, as in the case of mortgage contracts, where lenders were given room to directly renegotiate terms with clients. Mortgage complaints still account for the lion’s share of those filed with the Bank of Spain.

The independent financial customer ombudsman authority will fall under the umbrella of the Economy Ministry and will be free of charge for financial customers. It will be financed through a fee estimated at 250 euros, levied on the financial firm involved, for each accepted complaint.

Original story: Reuters | Staff 
Photo: Photo by Victor Iglesias on FreeImages
Edition: Prime Yield

Spanish banks slightly tightened the criteria for granting loans in the last months of 2021 and this trend seems to have continued at the start of the 2022 financial year, at least for companies, as credit to companies fell by 0.8% month-on-month in January, with 7,669 million euros less.

However, credit granted by financial institutions to companies rose by 1.05% year-on-year, to 931,989 million euros, adding 9,698 million euros as a result of the injection of liquidity measures approved by the government since the start of the pandemic, such as the 140,000 million ICO guarantees to deal with the impact of Covid-19.

Likewise, financing to households and non-profit institutions resident in Spain rose by 1% in January to 700,769 million euros, adding 6,933 million euros in a single year, and managed to hold steady at the start of the year, with just 778 million up (+0.1%) on December, according to data published on Tuesday by the Bank of Spain.

All this after the 2021 financial year closed 2021 with six-year highs in financing to companies (939,658 million euros), while it rose to families per omicron to around 700,000 million euros.

Maintenance of conditions in the first quarter

In the fourth quarter of 2021, the criteria for granting loans would have tightened slightly in Spain across the board, according to the latest bank lending survey of the supervisory body, and the data show that this trend would have continued at the start of 2022, especially for companies.

Banks do not want to make the mistakes of the past and have been gradually tightening the criteria for granting financing, especially in the retail and non-residential real estate sectors, although they have not turned off the tap in these areas, as credit continues to flow but loans are subject to stricter conditions as a precautionary measure to control default.

Looking ahead to the first quarter of 2022, the Spanish institutions surveyed do not expect significant changes in the supply of credit, so they anticipate that lending criteria will remain stable and that demand will grow, albeit at a “very moderate” rate.

Consumer credit falls and mortgages rise

The slight upturn in household credit is due to the increase in mortgage loans, which amounted to 514,738 million euros in January, up 76 million on a monthly basis and 5,289 million on a year-on-year basis (+1). Even so, mortgage credit still represents 73.45% of the total.

Household consumer loans fell by 3.4% month-on-month, with 3,229 million less, to 92,010 million euros, but on a year-on-year basis they rose by 0.5%. This monthly decline may be influenced by the increase in the savings rate, which reached record highs last year, and the pent-up demand that could gradually be uncorked in the coming months. There was also an increase in lending for “other purposes” to 91.237 billion from 87.324 billion in December.

On the other hand, on financing to companies, which leaves behind the maximum levels since 2015 that it had registered months earlier, the decline in loans from credit institutions to companies stands out, as they fell in a single month by 8,288 million euros (-1.7%), to 479,147 million euros, with a year-on-year decrease of 1.2%, as 5,803 million euros less were granted.Debt securities rose 11.2% year-on-year and 0.4% month-on-month to 143.142 billion euros. At the end of the first month of the year, foreign loans had grown by 0.3% year-on-year and were practically unchanged from December, with a total of 309,701 million euros.

Original Story: Economia digital| Sérgio Diago 
Photo: Photo by Pierre Amerlynck from FreeImages.com
Translation & Edition: Prime Yield

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