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“Volume of NPLs to Return to Pre-COVID Levels by 2022”

Even though Spain has already carried out one of the largest deleveraging programmes of NPLs in the EU, the market is recovering once again, as servicers see greatly increased turnover.

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The volume of Non-Performing Loans (NPLs) has fallen in Spain by more than 72% in the nearly last eight years. Even so, it continues to exceed 50 billion euros in volume, according to experts gathered at the ‘NPL Management Europe 2021’ event held a few days ago in Madrid.

Fernando Acuña, the managing partner at Aura Real Estate Experts, spoke of the trends in the market, which has gone from a peak of 197 billion euros at the end of 2013 to around €54 billion today. In addition, Nahuel Callieri, senior director at Alvarez & Marsal, added that “there are around €13 billion of foreclosed assets still in the hands of banks.”

“This means that the total volume of NPLs in Spain is, more or less, 70 billion euros,” Mr Callieri stated.

Mr Acuña noted that Spain has carried out one of the largest deleveraging programmes in the European Union, with close to €150 billion of Non Performing Assets (NPAs) sold off between 2015 and 2020. It is worth noting that portfolio buyouts were particularly high in 2017 and 2018, with sales of €53.1 billion and €51.2 billion, respectively.

Between 2015 and 2020, the main buyers were Blackstone, with €32.4 billion; Cerberus, with €26.3 billion; Lone Star, with €15.9 billion; Axactor, with €6.6 billion; and Oaktree, with €5.9 billion. The financial institutions that sold the most NPAs were Banco Santander (€37.5 billion), CaixaBank (€24.6 billion),  Banco Sabadell (€23 billion), BBVA (€21.3 billion), and Bankia (€11 billion).

Ignacio Meylán, managing director at Alantra, stated that he expects “transactions to reach levels close to that of 2019” in 2022. “The market is recovering; however, we are not going to see large transactions,” said Mr Meylán, who added that he does not expect “NPL transactions generated during or due to the coronavirus pandemic in the near future.”

Solvia and Altamira Sell NPLs

The main servicers in the Spanish market, the managing partner of Aura Real Estate Experts, highlighted that Solvia, owned by Intrum, and Altamira, 85% controlled by DoBank and 15% by Santander, have around 50 billion euros in assets under management, mainly NPLs.

Cerberus’ Haya Real Estate, Aliseda, 51% owned by Blackstone and 49% by Santander, and Servihabitat, owned by Lone Star (80%) and CaixaBank (20%), have around €30 billion in assets under management. In the case of Aliseda, it should be noted that 100% are Real Estate Owned (REOs) or foreclosed assets, while Haya and Servihabitat manage both NPLs and REOs.

Finally, Hipoges, 84% owned by KKR, has close to €25 billion in assets, mostly NPLs.

Claudio Panunzio, managing director of Hipoges Iberia, pointed out that “it is a very competitive market. There is some pressure on rates, staffing, salaries and technology, and I think we will probably be talking about that in the future.” “Clearly, it’s a very challenging market for all servicers,” he said.

Post-coronavirus recovery

Regarding the coronavirus pandemic and how it has affected the residential sector, Mr Acuña noted that, after a drop in sales last year, higher transaction levels are being reported in 2021 compared to 2019 in most parts of Spain.

While all the autonomous regions recorded declines in 2020, especially those most highly dependent on tourism, between January and July this year, only the Balearic Islands (-17%), the Canary Islands (-17%), Valencia (-7%) and the Basque Country (-5%) fell compared to the same period two years ago. Sales prices fell slightly in 2020, especially during the lockdown, returning to positive territory in the current year in many regions due to increased demand and low financing costs.

Michael Swenson, managing director of Tilden Park Capital Management, noted that “although transactions are down 18%, prices have increased.”

On the other hand, prices fell more in the rental market, especially in large cities, due to the increase in long-term supply and the effect of teleworking.

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