The buildings are depreciated banks and 1,500 million per year
05.05.2011 Maria Martinez 3
The mortgage sector is 8,500 million euros in capital to support the credit cost of a housing stock of 70,000 million.
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English Banking continues to absorb the impact of the housing crisis, a market with no signs of recovery after four years of adjustment from the peak marked in the middle 2007.
header Real estate major financial institutions lost last year 1.539 million euros as a whole. Their negative result between 409 million Servihabitat owned by La Caixa, and the 127 million Mesena, Banesto (see chart). They are not real red numbers, ie the difference between what the institution has paid for the property and what you've got to sell. Most of these losses are accounting entries reflecting the depreciation of property and the effort made to cover supplies. Double bill
The strong demand for envelopes is one of the major bills to be paid by the sector. Banks and accumulate property by 70,000 million euros as a result of defaults of firms and households. Represent about 2% of its consolidated assets. To cover its decline, the sector has provisioned 17,000 million, equivalent to the benefits of last year.
a piggy bank is insufficient.
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The reform approved by the Bank of Spain last summer set a coverage of 30% of asset value after two years of its entry into balance. Although this percentage has been reached and even exceeded in many cases, "we all know that further supplies," explains financial sources. An indication of the supervisor. A significant part of the property (mainly ground) will remain in balance for a long time and have to cover the risk of further depreciation. "There are buildings that take to sell up to a decade," match different entities. The bill provisions is the high capital cost. For the purposes of calculating the solvency ratio, foreclosed or acquired properties have a risk weight of 150%, the same as the bad loans. Considering
principal minimum requirement of 8% of risk assets, the consumption of resources of the property portfolio comes to 8,500 million euros. Banks and 170,000 million of funds have the highest quality (principal).
In practice, therefore, the sector has mortgaged the 5% of its capital to sustain a real estate empire that provides no return. With this capital could finance, for example, large purchases Santander and BBVA have done during the crisis to capture growth plus emerging economies such as Poland or Turkey.
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The impact on profitability is, in fact, another major crisis arising from the estate. The investor seeks to powerful institutions that can endure beyond the needs of the financial business and real estate, power translate their performance.
"Real estate assets are burdening the profitability and in the future will continue to affect the ROE (return on equity) and ROA (return on assets), "he remarked in the sector.
is a handicap to hold the shareholder and to embark on the search for new investors. The bank's ROE in one year has fallen from 9% to 7.9%. The return on assets has declined by 7 basis points to 0.47%, according to the latest Financial Stability Bank of Spain. Provisions for buildings are key to this cut, with funding by loans and the decline in net interest income. Strategy
When releasing ballast, the strategy is clear. "If you sell the property at prices appropriate, for sale. But if there are assets that can generate more value in the future, endure and in the meantime, try to monetize through a rental fleet, "say industry sources.
Overall, banks are selling homes (the soil remains illiquid) with losses of between 20% and 30%, which usually coincides with the provision made.
The opportunity cost is not ignored. "Even if you have capacity, you can not stand it," continuing the same sources. "If you believe that property prices will rise and offset the cost of keeping is maintained. If not, you have to be the first to sell, "they conclude.
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