Banks will sell over 120 Bn distressed assets this year

• In the first half of the year it has sold 62 Billion, including operations from Santander and BBVA
• Investment funds think that they have to take advantage of low-interest rates and excessive liquidity to buy

Spanish banks have stepped on the gas to end the liability of Real Estate, although there are still two or three years to finally put an end to the excesses product of the financial crisis. Not as much by the cleaning of real estate portfolios, but rather defaulted loans portfolios, a chapter that remains high on the financial entities’ balances.
Thus, the experts expect that this year we’ll beat a new record in portfolio sales, for an approximated amount of 120 Bn Euros, adding the macrooperations from Santander and BBVA, announced last year but performed this year. Without them, the figure could amount to 51 Bn, a slightly higher figure to 2017, that would raise up to 80 Bn if Sareb matches to sell 30 Bn-worth portfolio.

Pressure from the ECB and the Bank of Spain added to the one the market exercises, are making the financial entities choose to sell their distressed debt portfolios in a single operation if possible, instead of little by little, at the prospect of raises in price.

The interest of investment funds to investing in Spain, and just now at the prospects of further increase in prices of the RE assets in the future, is also making the banks undertake a clean-up of their balances between this year and the next, just as the start of the crisis hits its 10th anniversary, some experts explain.

“Funds have great amounts of liquidity available. Also, the interest rates are still at all-time low levels (still in red numbers), so they can finance themselves at very low prices, hence their interest in purchasing large portfolios of assets linked to Real Estate. They want to take advantage of the moment”, explains Mr. Iñigo Laspiur, director of Corporate Finance at CBRE Spain.

All the experts say the sale by Santander of the Real Estate from Popular to Blackstone, an operation that was announced last year but ratified at the start of this year for a gross amount of 30 billion euros was the trigger for the banks to start getting rid of the portfolios en masse.

Since the operation was ratified at the start of the year, the banks have got rid of over 62 billion of distressed assets. In this sum the operation closed between BBVA and Cerberus is counted, worth 13 billion. This operation nevertheless is pending the approval of the Deposits Guarantee Fund (FGD) as part of it has an asset protection scheme (EPA), as they originate from the failed savings bank Unnim.

Financial sources maintain that there are currently operations underway for another 21 Bn, to which we have to add an additional 8 Bn that could be closed in the next few months. Among the earlier, a sale worth 11 billion in Sabadell’s assets (900 million sold already to Axactor), which sale is scheduled for this month.

To these figures, we could add 30 gross billion from the sale of a portfolio from Sareb, if the government led by Pedro Sánchez gives the potential operation the green light, in the end. Santander has also put another 6 Bn on sale.


Epas. Sabadell, just like BBVA, won’t be able to close the sale of an important part of its RE assets until the FGD approves the operation, as it incorporates assets from CAM, that has asset protection scheme.
CaixaBank. Last Thursday CaixaBank announced that it had reached an agreement with Lone Star to sell 80% of its NPLs, including its real estate platform Servihabitat, valued as a whole in 7 Bn euros,m which means the fund will disburse around 5.6 Bn for the real estate assets from the Spanish entity (at October 2017’s valuation).

DPOs Investment funds currently reclaim lower DPOs than 5 years ago. They seek less rents in exchange to purchases they expect to yield more in the future. 5 years ago the discount payoffs reached 75% in some case. Now they can barely reach 38% or less.

Source: Cinco Días. Translation by Miguel Vinuesa Magnet.

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