Spain’s sovereign debt crisis is forcing the country’s savings banks to sell their troubled property assets and non-performing loans into a weak market.
Spanish banking conglomerate Bankia last year failed to sell its Kio Tower in Madrid after potential purchaser Realia decided the sale price of more than €200m was too high.
But it is understood that the bank has put the tower on the market again and Spanish developer Realia is thought to be back in the bidding. CBRE valued the tower at €202m at the end of last year.
According to Jesús Varela, a partner at law firm Salans in Madrid, new bank rules set by the government will accelerate banks’ sales of real estate.
“The new clean-up regulations are going to open the market a lot. There will be more trading,” said Varela.
Corporate deals will also increase as banks consider selling their stakes in real estate companies. Spanish construction firm FCC, which already controls 30% of Realia, recently said it was willing to increase its participation to 45% by buying part of Bankia’s 28% stake in the firm.
“Many companies are controlled by banks, so there will be deals involving both real estate and debt,” Varela said.
According to a government report, Spanish banks’ exposure to real estate is around €310bn, three-fifths of which are classified as problematic, while €80bn are repossessed assets.
In February this year, the new centre-right government led by Mariano Rajoy told banks they had to cover up to €54bn of that, while a new set of regulations launched in May adds a further €30bn to that sum.
The new rules provide for new potential capital injections from the state and encourage the creation of property companies which would take real estate assets off banks’ balance sheets while attracting investors.
The residential sector is mainly involved since Spanish banks control around 47% of it, but commercial property will be affected as well.
Last month the government granted a €19bn bailout to Bankia. And three Spanish savings banks – Ibercaja, Liberbank and Caja3 – have approved a merger to strengthen their weakened balance sheets.
The merged bank would create the country’s seventh-biggest lender, with €120bn in assets. This week Spain told the European Central Bank that it is not seeking a bailout; economy minister Luis de Guindos said no decision would be made until audits of the banks were completed, possibly by the end of June.
