Property companies and mortgage borrowers are defaulting in rapidly rising numbers as Spain’s property slump digs in, leaving the banks that financed them holding the baby. Defaults and repossessions are turning Spanish banks into some of the country’s biggest estate agents.
This is not the first time that Spain’s banks have become unwilling owners of some of the country’s largest property portfolios. It was the same story in the property crash of the early 90s. Last time round there was a happy ending, as banks sold off their property divisions for handsome profits during the boom.
According to an article over the weekend in the Spanish daily ‘El Pais’, Spanish banks have lent a combined 300 billion to developers, and 600 billion to private mortgage borrowers. As the recession bites, defaults rates have quadrupled to 3.29%, back to where they were in May 1997, compared to just 0.83% in December 2007. As loans turn sour, banks are having to take back properties.
To deal with the situation, Spain’s banks are having to get back into the property sales game.
Santander, Spain’s largest bank, has set up Altamira Santander Real Estate to try and liquidate a property portfolio of 2.7 billion Euros. Hefty discounts will be used to shift the stock, which will be promoted online and in catalogues distributed in Santander’s branches. The bank’s 20,000 staff will get first bite at the apple.
Banesto will use its property arm Promodomus to try and shift a growing property portfolio of valued at 1 billion Euros.
El Pais reports that CAM Bank, Banco Sabadell, Unicaja, Caixa Galicia, Caixa Catalunya, Cajasur, Banco Popular, and Ibercaja all have similar initiatives underway. Caja Madrid, Caja España, Caja Navarra and Caja Canarias are also selling properties resulting from repossessions.
Amongst the most aggressive is CAM Bank, which has set up CAM Real Estate Opportunities (Oportunidades Inmobiliarias CAM) to dump quickly more than 450 properties with discounts reported to be around 20% and 100% financing.
According to Reuters, the initial book value assets of the property companies created by the banks are as follows (in millions of euros):
BANK, PROPERTY COMPANY, VALUE €b
Santander, Altamira, 2,634
Popular, Aliseda, 1,400
Banesto, Promodomus, 1,134
Sabadell, Solvia, 800
BBVA*, Anida, 629
Bankinter**, --, 59
La Caixa, Servihabitat, 550
Caja Madrid**, --, 600
*Last year, BBVA invested an additional 1.57 billion euros
to buy 95.6 percent of its property fund, the second biggest on
the Spanish market, according to bank data.
**Have not created subsidiaries exclusively to manage