Banks losing fear over distressed debt

The purge has been more than significant. During 2017, the Spanish banks ‘cleaned’ from its balances over 25 Billion of debt considered problematic or non-performing loans (NPLs). Hence, we passed from 131.8 billion to 106.2 at the end of the year, a drop of 19.4%.

If we focus in the top ten of the Spanish banks(Santander, BBVA, Caixabank, Bankia, Sabadell, Bankinter, Kutxabank, Unicaja, Ibercaja and Abanca), NPLs shrinked by 19 billion, placing the amount at 68.620 billion, according to a report from Alvarez & Marsal consulting. In this manner, the NPL ratio dropped from 8.27% to 6.57%.

Guilty? Although each did their homework in their own way, it’s worth mentioning 30 billion from this type of distressed assets come from Banco Popular to another firm composed by Blackstone and Santander.

The banks have plans

If we look to the 2017 data, the Spanish bank is presenting very diverse percentages regarding non-performing assets. The worst placed is Bankia (9.4%), followed by Unicaja (8.4%) and Ibercaja (7.9%). In the other edge, Bankinter (3.8%), Kutxabank (4.9%) and BBVA (5.2%).

“Spanish banks have credible plans to reduce their unrecoverable loans. We expect their previsions are stable or diminish”, says Bloomberg Intelligence.

In this particular race, banks are counting with an important tailwind to ditch distressed debt: the investing appetite from investment funds. BBVA for instance, sold all its distressed Real Estate to the US fund Cerberus. Other entities, such as Liberbank, followed the same example, reducing their exposition up to 7.8%. Their previsions point at that percentage dropping to 5% at the end of the year. Sabadell, with Solvia, may be next.

That 5% is the limit that both the European Central Bank (ECB) and the EBA will demand from banks at the end of the year. If they’re above, they will be qualified as distressed, and specific plans of deinvestment and asset sales will be put in place.
The EBA has highlighted the effort undertaken not just by Spanish banks, particularly, but also European banks. Nevertheless, it cautions about the disparity between countries and entities. A clear case is Intesa SanPaolo, which gross NPL ratio in relation to the total loans granted was placed in 11.7%. If we consider the agreement with the Swedish entity Intrum (by which it transfers 11 billion in toxic assets), the percentage is around 9.5%.

“Although it dropped its defaulted loan, its NPL ratios probably will stay above their peers’ for a few years, yet Intesa’s target is 6% for 2021. Feasible but above average, says Bloomberg Intelligence.

ING and ABN have the lowest default rates: 1.7% and 2.5% respectively. Meanwhile, BNP Paribas is close to 2.9%. “The highest defaulted rates from BBVA and Santander reflect the exposition of emerging markets and the loan problems in Spain”, Bloomberg nuances. And they conclude: “Santander’s credit provisions are higher than other banks, but the large net interest margins allow it to absorb this risk cost”.
Source: Valentín Bustos / Merca2.es Translation by Miguel Vinuesa Magnet.

Comments are closed.

COOKIE POLICY

What are cookies

Cookies are small files that contain certain information about the user's browsing through the web page. Cookies are sent to the user's browser and stored on your computer.

Purpose of cookies

Cookies are used to capture information about the user's browsing, by analyzing it, to find out how the user interacts with www.copernicusservicing.com, and thus optimize the experience of browsing.

Types of cookies The cookies we use are:

- Analysis Cookies (Google analytics): they allow the monitoring and analysis of the user's behavior in order to introduce improvements according to the user's use of the web page and the services. According to Google, Google Analytics is a free web analytics tool that mainly allows website owners to know how users interact with their website. It also enables cookies in the domain of the site where you are and uses a set of cookies called "__ utma " and "__ UTMZ " To collect information anonymously and to produce web site trend reports without identifying individual users. Learn more about Google analytics at:

https://developers.google.com/analytics/devguides/collection/analyticsjs/cookie-usage

-Technical cookies: Allow the user to navigate through the website and use their different options or services.

Disabling cookies

Users can reject the possibility of us using cookies on their terminal computer by configuring their browser, but this will lead to a less satisfying browsing experience that can even be flawed. For more information on deactivating cookies visit:

https://support.mozilla.org/es/kb/Borrar%20cookies

https://support.google.com/chrome/answer/95647?hl=es

http://windows.microsoft.com/es-xl/internet-explorer/delete-manage-cookies#ie=ie-11-win-7

http://support.apple.com/kb/ht1677?viewlocale=es_ES