A recent article in the Spanish financial daily Cinco Días explains how property assets still weigh heavily on the Spanish banking system, all these years later.
In 2016 the main banks Santander, BBVA, CaixaBank, Sabadell, Popular, and Bankia off-loaded 70,129 properties for 10.5 billion Euro, the equivalent of 192 sales per day, including homes, land, and offices. Even so, these banks still have more than 100 billion Euro of real estate exposure, most of it (€68 billion) properties, the rest bad loans to developers. It’s about 15% of their balance sheet, with provisions made already for just 50% of that figure.
Compared to other countries, this level of real estate exposure is far from normal. For example, in France, the equivalent exposure is 3%, and less than 2% in Nordic countries. Experts like the international credit rating agency Standard & Poor’s forecast that real estate related assets on the books of the Spanish banking system will go down to 13% this year, and 11% next year, but that still leaves it in double digits two years from now. That said, the housing market recovery is helping, as is the better economic situation, so much so that banks like Goldman Sachs are recommending some Spanish bank stocks (reports the Spanish press).
The Spanish banking system has been trying to digest for years this hangover from the real estate boom it financed so recklessly, but not enough has been done. Spanish banks were slower to face the problem than other countries like Ireland, though the magnitude of the problem was bigger in Spain than anywhere else in Europe.
Does that mean you can still buy a bargain from a bank? Perhaps, but from what I can tell, all the best bargains went long ago. Now they are left with the dregs, and there’s still an awful lot of that.