Toxic, unproductive or problematical, or however you want to call those assets which were the ruin of the Spanish banks, are not easy to get rid of. But they have been freeing up space thanks to the huge efforts on the part of lenders. The assets linked to the property bubble reached over 300 billion euros at the worst point of the crisis, between 2011 and 2012. The last official figure is 190 billion euros, provided by the Bank of Spain in its financial stability report of last May, a reduction of nearly 38%.
Taking as a basis the five big Spanish banks, and according to a report from financial consultants Alvarez & Marsal, in 2017 the contraction was 27% with respect to the previous year, which means a further reduction of 39 billion euros in toxic assets.
The consultancy, which has based its calculation on the banks’ annual results, also concluded that Abanca and Bankinter, out of all of the lenders, are the ones which show a more positive percentage of unproductive assets (net doubtful and foreclosed) versus shareholder funds.
The first entity, which is the result of the segregation of Novacaixagalicia’s banking business, ended the year with a ratio of 28%, while the second had a ratio of problematic assets of 30%. At the other end of the spectrum, the Spanish bank with the most toxic assets is Liberbank, with 86%. That said, paradoxically, it is the one which has decreased its exposure to the property sector the most: it reached 125% of its capital.
The recent sale of 80% of BBVA’s property portfolio to Cerberus is not included in Alvarez & Marsal’s accounts. With this figure, the amount of unproductive assets which have disappeared would have risen by 36% to 52 billion euros.
In the end according to Alvarez & Marsal’s figures, taking into account all the divestments in bricks and mortar up to the end of 2017, Santander, BBVA, Caixabank, Bankia and Sabadell still have on their balance sheets some 106 billion euros of unproductive assets. Of this total, 48 billion euros are foreclosed and the remaining 58 billion are bad loans. In addition, there is the 21 billion euros in the hands of smaller groups like Liberbank, Unicaja, Ibercaja, Kutxabank and Abanca, amongst others.
So what can be done with those unproductive assets which are still there? There are many voices, in Spain and Europe, calling for the creation of a specific market to provide a way out for this burden which affects Greece, Italy… the whole region holds €921 billion in September 2016 (almost 9% of the euro area’s). Who dares create a Banking Union with this precedent?
*Photo: Flickr/ Manu Barranco