Spanish banks – no hurry to shift distressed assets

BBVA – In no hurry to shift assets

The boss of Banco Bilbao Vizcaya Argentaria (BBVA) says that the second largest bank in Spain is “in no hurry” to move the 1.5 billion euros in distressed assets, choosing to wait for bids to go up.

BBVA’s Chairman and Chief Executive Francisco Gonzalez made the comments in Taipei as he attended the opening of the banks new office. He also said that he does not envisage any significant improvement in international feeling towards Spain’s banking sector following the approval of 100 billion euros to recapitalise them.

“We are in the process of selling (our distressed assets). Any euros we can get is a profit. We are not in a hurry and we are waiting for bids. Those bids were really low a year ago but are now going up and we are waiting for even better bids,” Gonzalez said, but declined to say how much the bank expected to sell.

BBVA is trying to sell a mix of repossessed real estate and defaulted loans, a similar situation to most other Spanish banks.

Euro zone leaders agreed a deal to inject capital directly into Spanish banks and to buy bonds to support financially strapped countries, and to try and curb a regional debt crisis that could threaten the Euro.

Despite the rescue efforts, Gonzalez said he does not see any improvement in sentiment towards Spanish banks among international investors.

“Now we are in the midst of the turmoil, and my view is that it has probably improved a little bit over the last few days because of what has happened in EU over the weekend, I think people are starting to understand the real scope of the decisions taken at the summit,” he said, adding that although there has been some signs of a positive reaction in the markets, more time was needed.

He also said that the crisis will not stop BBVA’s international expansion.

“The crisis is a big opportunity for BBVA to expand market share. We haven’t changed our expansion plans all over the world. We believe our business model is very consistent and we see a lot of growth in the countries in which we are working.”

Bank of Spain to sell Unnim

Bank for sale for 1€

The Bank of Spain has today announced their intention to sell Unnim, a loss-making savings bank, to BBVA for the princely sum of one euro.

Unnim, created with the merging of three smaller savings banks, was taken over by the central bank in September 2010 after failing to meet minimum-capital requirements.

It is one of five banks taken over by the central bank following the collapse of the property market in 2008 which left much of the country’s banks with huge debts.

The bank has experienced losses of 953 million euros which will be absorbed by Spain’s bank deposit guarantee fund before being sold to BBVA, the second-biggest bank in Spain, in terms of assets. The fund will also assume 80% of Unnim’s future losses for a period of 10 years.

During the first nine months of 2011, Unnim notched up losses of more than 107 million euros.

BBVA president Francisco Gonzalez thinks the deal is good for both banks.

“This operation is good for BBVA and it is good for Unnim,” he said, adding that it will “help strengthen the Spanish financial system”.

Bids for the struggling bank were accepted until February 20th, with BBVA being picked over bids from Spain’s largest bank Santander, Banco Popular and Ibercaja.

In terms of assets the merger will make BBVA comparable with Santander. At the end of 2011 BBVA had assets, in Spain, worth 309.9 billion euros, while Santander recorded assets totalling 337.8 billion euros.

The central bank intends to sell off several bailed-out banks during 2012, including Caixa Catalunya and Banco de Valencia.

Good news for UK mortgage applicants

Finally, some good news for UK mortgage applicants has come from the Spanish banks.

BBVA, from their London network, have just launched and are now marketing a new 65% loan for purchases in Spain.

The product offers a choice between linking to the 3 month Euribor or Bank of England Base rate in either Euros or Sterling.

Covered under UK law, whilst secured against the Spanish property, the product has the benefit of competitive rates, second highest loan to value available in Spain, zero early repayment penalties and no compulsory life cover linked.

Minimum loan size is Euros 100k or GBP 83k.

BBVA is also offering a 50% equity release product for general purpose. With all other banks only offering this facility for home improvements or purchase of another property in Spain this is a real bonus for clients looking to raise money against a Spanish property to take funds out of Spain.

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Spanish banks reserve money for real-estate losses

Three of Spain’s largest banks have released details of their plans to comply with government regulations to provide provisions to cover real-estate losses.

Last week, Banco Santander announced that they had set aside €1.8 billion to cover losses on repossessed homes and they now plan to add a further €2.3 billion to this reserve.

Banco Bilbao Vizcaya Argentaria (BBVA) say they will set aside €1.4 billion, which will be added to money it had already reserved before the government regulations were announced.

BBVA made it clear that its good results in 2011 meant it would be able to “entirely absorb” losses in 2012 using this money.

Caixabank also stated it is looking for an extra €2.4 billion to set aside to cover its real estate assets and losses.

Manuel Gonzalez Cid, financial director at BBVA, told Reuters that “These are the strongest banks in the Spanish financial sector so it’s not surprising they can manage the [requirements] through generic provisions or by bringing forward other capital buffers.”

As well as downgrading Spain’s sovereign debt rating this week Moody’s also downgraded Catalunya Banc and Bankia’s debt and deposit ratings over concerns that they are unlikely to meet the requirements for covering real estate losses as laid out by the government.

Valuation gap in Spanish property

Spanish property valuations are causing friction between banks and investors.

The Financial Times revealed financial institutions have, on occasion, refused to sell real estate assets because the price offered by the buyer has been considered too low.

Wences Bunge, head of Credit Suisse’s European real estate group, said “Sellers have not adjusted expectations to the new reality. But I believe we are starting to see that reality.”.

Wences also pointed out that experienced investors are staying away from Spain’s property market and he does not expect this to change in the next 12 months.

According to Jones Day in Madrid economic uncertainty is the main reason why buyers may be postponing their purchase.

Meanwhile, delegates at Reuters Global Wealth Management summit were told that property prices in Spain’s coastal regions had reached rock-bottom and that the number or transactions was starting to show signs of recovery.