secured distressed debt in spain as of august 31st 2013
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Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
1© Mediterranean Capital Management. All Rights Reserved.
August 31st 2013 – Other Resident Sectors
Boletín Estadístico del Banco de EspañaOctober 2013
Manuel Guillén i SolàChief Executive Officer
Barcelona, November, 28th 2013www.mediterraneancapital.com
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© Mediterranean Capital Management. All Rights Reserved.
Mediterranean Capital Management, S.L.Rosselló 253, 5th Floor – 2nd Suite
08008 Barcelona – SpainTel. +34 932 553 130 – Fax +34 932 553 109
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Disclaimer
All data included in this document comes from official sources provided by Banco de España (BdE) and International Monetary Fund (IMF), and quoted in the following documents:
�Methodological Notes on the Financial Accounts of the Spanish Economy; BdE, Madrid, 2011
�Monetary and Financial Statistics Manual, IMF, Washington D. C., 2000
© Mediterranean Capital Management. All Rights Reserved. 3
� Boletín Estadístico, Octubre 2013; BdE, Madrid, 2013
Mediterranean Capital Management (MCM) and the author/s don’t express their own opinion about the accuracy and/or precision of the data provided by BdE.
This document does not contain any data, analysis or criteria used by MCM to build its market analysis and/or investment strategy. No investment guidelines can be deduced from this document. No investment commitments from our side will be made based in the opinions and/or analysis included in this document. We can follow or not any strategic direction reflected here. Our investment guidelines and decisions are strictly confidential.
Executive Summary
• After two-years recession, non-performing loans across Spanish banks amounted to a record-high EUR180.94 billion ($247
billion) in August, breaking 12.12% of all outstanding loans (Boletín Estadístico, Octubre 2013). As expected Domestic
Demand and GDP growth will continue almost flat in the coming quarters, consensus forecast indicate that the delinquency
ratio will steadily increase in the forthcoming months.
• Bad loans amounted to EUR180.94 billion ($247,0 billion) in August. This increase was compounded by another decrease in
total loans, to EUR1.49 trillion in August, as lenders reduced the amount they lent to the economy.
• According to advanced Bank of Spain official data, non-performing loans amounted a new record-high at 12.68% of all loans
in September, up from 12.12% in August. Lenders reduced again the amount lent to the economy to EUR1,48 trillion.
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 4
in September, up from 12.12% in August. Lenders reduced again the amount lent to the economy to EUR1,48 trillion.
• The decline in Spanish non performing loans since December
2012 is only due to the transfer of bad assets (NPLs & REOs)
into a bad bank, called Sareb. Once the transfer is corrected,
non-performing loans are still accumulating.
• Spain’s increase in the non-performing loans ratios are not
limited to real estate, with significant deterioration of loan
books across all economic sectors.
• Residential mortgages non-performing loans, which showed
a stable path back in 2010/2011, are now increasing again.
Source: elpais.com
As of August 2013, total aggregated balance sheet of the Spanish credit institutions accounts for 3.163.079 M € ($ M 4.299.257) of which 1.490.218 M € ($ M 2.025.504) are loans to “Other Resident Sectors”.
As of August 31st 2013, total doubtful assets account for 186.264 M € ($ M 253.170) . AS of June 30th 2013, total doubtful assets accounts for 182.302 M € ($ M 247.784) and total arrears (1) portion of the doubtful assets account for 143.811 M € ($ M 195.467).
Secured Distressed Debt Market in Spain – Summary I
Banco de España, August 2013(data in M €)
Total Aggregated Balance Sheet 3.163.079
Loans 1.976.894
Credit System 203.123
General Government 97.294
Other Resident Sectors 1.490.315
ROW 186.162
Spanish Credit Institutions
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 5
Loans
Securities Other than Shares
Shares and Other Equities
Unsectorized Assets
(1) Arrears: Includes non-performing doubtful loans which are those in respect of which some amount of principal, interest or any other contractually agreed expense is more than three months past-due or exceeds 25% of total debt (unless these loans are specifically classified as written-off assets)
Source: Banco de España, Boletín Estadístico; October 2013- Official data as of August 31st 2013
Securities Other than Shares 552.079
Domestic (1) 472.255
ROW 79.824
Shares and Other Equities 274.959
Domestic 186.087
ROW 88.872
Unsectorized Assets 359.145
Cash 6.465
Other 352.680
(1) Securities Other than Shares August ‘13 - Domestic Breakdown
Total - Domestic 472.255
Credit System 58.197
General Government 294.675
Other Resident Sectors 119.383
As of June 2013, mortgage loans account for 801.307 M € ($ M 1.089.136) of the total loans to “Other Resident Sectors”. This represents a 53,4% of total loans to “Other Resident Sectors” and a 25,3% of the total aggregate balance sheet of the Spanish credit institutions.
As of June 2013, total doubtful assets related to “Other Resident Sectors” account for 180.673 M € ($ M 245.571).
Secured Distressed Debt Market in Spain – Summary II
Other Resident SectorsBanco de España, August 31st 2013
(data in M €)
Other Resident Sectors 1.490.315
Trade Credit 31.496
Total Loans
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 6
Mortgage Loans
Other Secured Loans
Other Fixed-Term Loans
Debts Repayable on Demand
Finance Leases
Doubtful Debtors
Source: Banco de España, Boletín Estadístico; October 2013- Official data as of June 30th and August 31th 2013
Trade Credit 31.496
Secured Loans 832.009
Mortgage Loans 801.307
Other Secured Loans 30.702
Other Fixed-Term Loans 393.931
Debts Repayable on Demand 32.616
Finance Leases 19.590
Doubtful Debtors 180.673
Secured Distressed Debt Market in Spain – Summary III
Total Loans
Other Resident SectorsBanco de España, Q2-2013
(data in M €) %
Other Resident Sectors - Total Loans 1.519.123 176.643 11,6%
Financing of Productive Activity 730.765 131.763 18%
Agriculture, Hunting, Forestry and Fishing 18.974 2.230 11,8%
Industry (excluding Construction) 122.351 14.002 11,4%
Construction 64.195 18.624 29,0%
Doubtful Loans
Total Amount
Loans by Sector
Total Amount
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 7
Construction 64.195 18.624 29,0%
Services (Total) 525.245 96.908 18,5%
Wholesale & Retail Sale & Repairs 73.594 9.644 13,1%
Hotels & Restaurants 31.683 6.282 19,8%
Transport, Storage & Communication 42.331 4.753 11,2%
Financial Intermediation (excl. Credit Instit.) 65.252 2.536 3,9%
Real Estate Activities 198.431 61.759 31,1%
Other Services 113.953 11.935 10,5%
Other Financing to Households 738.107 43.802 5,9%
House Purchase & Renovation 618.663 31.916 5,2%
Mortgage Loans 582.887 28.629 4,9%
Renovation & Other 35.776 3.288 9,2%
Consumer Durables 26.762 1.738 6,5%
Other 92.683 10.147 11%
NPISHs 6.754 345 5,1%
Unclassified 43.497 733 1,7%
Source: Banco de España, Boletín Estadístico; August 2013- Official data as of June 30th and August 31th 2013
Secured Distressed Debt Market in Spain – Summary IV
House Purchasing & Renovations (families & individuals) doubtful mortgages sum 31.916 M € ($43.285 M)and account for a 18,1% of the total doubtful loans to “Other Resident Sectors”.
After the massive transfer of assets to Sareb, doubtful loans related to Real Estate Activities (61.759 M € -$83.759 M) and Construction (18.624 M € - $25.258 M) account for a 45,5% of the total doubtful loans to “Other Resident Sectors”.
Percentage of Doubtful Loans vs. Total Loans
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 8
Percentage of Doubtful Loans vs. Total Loans
TotalDoubtful Loans
Other Residents Sector
176.643M €
Source: Banco de España, Boletín Estadístico; Oct 2013- Official data as of June, 30th 2013
Secured Distressed Debt Market in Spain – Summary V
Total relevant non-performing loans market in Spain (Other Resident Sectors) account for 176.643 M €: Almost 112.299 M € are non-performing loans secured with real estate assets: mortgage loans to Individuals & loans to Real Estate and Construction industries).
Spanish Credit Institutions Aggregated Balance Sheet
3.163.079 Doubtful Mortgage Loans to Individuals 31.916
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
Source: Banco de España, Boletín Estadístico; Q2-2012- Official data as of June, 30th 2012
Total Relevant NPL Market 176.643 M €
Loans to “Other Resident Sectors” 1.490.315
Mortgage Loans to Individuals 618.663
Total Mortgage Loans 801.307
Doubtful Loans to the rest of the Other Residents
64.344
Doubtful Loans to Construction Services 18.624
Doubtful Loans to Real Estate Industry 61.759
Secured Distressed Debt Market in Spain – Definitions I
Other Resident SectorsComprises the following sectors:
1. (S11) Non-Financial Corporations
Definitions and Classifications used in this document follow the
criteria set out in the document “Methodological Notes on the
Financial Accounts of the Spanish Economy”, Banco de España 2011.
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 10Source: Banco de España, Methodological Notes on the Financial Accounts of the Spanish Economy, 2011
1. (S11) Non-Financial Corporations1. Limited Liability Companies2. Cooperatives and Partnerships3. Non-Profit Institutions or Associations serving Non-
Financial Corporations4. Holding Companies5. Quasi-Corporations
2. (S14) Households1. Individuals or Groups of Individuals2. Collective Households3. Unincorporated Businesses Owned by Households4. Individuals that produce goods and services for
exclusively own final use5. Non-Profit Institutions Serving Households (NPISH)
without independent legal status
3. (S15) Non-Profit Institutions Serving Households
Secured Distressed Debt Market in Spain – Definitions II
S11- Non-Financial Corporations
The sector non-financial corporations comprises both private
and public resident market-producer institutional units
whose principal activity is the production of goods and non-
financial services, whose distributive and financial
transactions are distinct from those of their owners and
which are, moreover, separate legal entities from their
owners.
The institutional units forming part of the sector are as follows:
Therefore, non-financial sole proprietorships without
independent legal status are classified in the sector
“households”, except for very large ones (quasi-corporations)
which are classified in sector “non-financial corporations”.
In Spain, it is assumed that this definition is met by all non-
financial corporations that use in their relations with credit
institutions and the tax authorities a tax identification number
beginning with a letter :
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 11Source: Banco de España, Methodological Notes on the Financial Accounts of the Spanish Economy, 2011
The institutional units forming part of the sector are as follows:
• Limited liability companies whose capital is divided
into shares (quoted or unquoted) or into
“participaciones”(equity units);
• Cooperatives and partnerships recognized as
independent legal entities;
• NPIs or associations serving non-financial
corporations recognized as independent legal entities;
• Holding companies; and
• Quasi-corporations, which are entities that, despite
not having independent legal status, have an economic
and financial behavior that is different from that of their
owners and similar to that of corporations, i.e. they
keep a complete set of accounts and have autonomy of
decision and are thus considered as distinct
institutional units.
� A: “Sociedades Anónimas” (public limited
companies),
� B: “Sociedades de Responsabilidad Limitada”
(private limited companies), etc.], except associations,
jointly held property and owners’ associations,
� and “Sociedades Civiles” – partnerships governed by
the Civil Code– (E, G and J, respectively), which are
classified under “households”.
Those enterprises controlled by general government which,
despite their corporate legal nature, are not market producers
are not included in this sector. Such corporations have been
classified in the sector “general government”. Also excluded
are non-financial sole proprietorships without independent
legal status, which are classified in the sector “households”.
Secured Distressed Debt Market in Spain – Definitions III
S14- Households
This sector comprises individuals or groups of individuals
as consumers and possibly also as entrepreneurs
producing market goods and non-financial and financial
services provided that, in the latter case, their
distribution (income, taxes, transfers, etc.) and financial
operations (deposits, loans, securities etc.) are not
separated from their business activity.
• Collective households, i.e. persons living
permanently in institutions (retirement homes,
prisons, religious orders, etc.);
•Unincorporated businesses owned by households
(sole proprietorships, owners’ associations without
independent legal status, etc.);
• Individuals that produce goods and services for
exclusively own final use; and
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 12Source: Banco de España, Methodological Notes on the Financial Accounts of the Spanish Economy, 2011
Sole proprietorships that are not separate legal entities
from their owners are included here, except those
(normally large) which, despite not having independent
legal status, behave economically and financially like
corporations (“quasi-corporations”). The latter are
classified under “non-financial corporations”. This sector
also includes individuals or groups of individuals as
producers of goods and non-financial services for
exclusively own final use.
Specifically, this sector includes:
• Individuals or groups of individuals whose
principal function is consumption;
exclusively own final use; and
• Nonprofit institutions serving households which
do not have independent legal status.
In Spain, the practical application of this definition
involves including in this group individuals and groups of
individuals which in their relations with credit institutions
and the tax authorities use as their tax identification
number (NIF) their national identity card number (DNI)
followed by a letter and those which use a NIF beginning
with the letters E and H (owners’ associations and jointly
held property, respectively).
Secured Distressed Debt Market in Spain – Definitions IV
S15- Non-Profit Institutions Serving
Households (NPISH)
“Non-Profit Institutions Serving Households” are
defined as non-profit institutions which are separate
legal entities, which serve households and which are
private other non-market producers.
When these institutions are not recognized as
The sector NPISHs comprises trade unions,
professional, scientific, religious, recreational and
cultural associations, social, recreational and sports
clubs, etc, and charities and relief or aid associations.
The main resources of this sector, apart from those
Secured Distressed Debt Market Size in Spain as of August 31st 2013 – Other Resident Sectors
Barcelona, November, 28th 2013
© Mediterranean Capital Management. All Rights Reserved. 13Source: Banco de España, Methodological Notes on the Financial Accounts of the Spanish Economy, 2011
separate legal entities, they are included in the sector
“households” because the transactions carried out by
the two sectors cannot be distinguished.
NPISHs which are non-market producers and
controlled by general government are classified in this
sector. Non-profit institutions operating under market
conditions or not serving households must be
sectorised as “non-financial corporations” or
“financial institutions”, as appropriate.
The main resources of this sector, apart from those
derived from occasional sales, are derived from
voluntary contributions in cash or in kind by
households, from payments made by general
government (provided that they are not controlled
and mainly financed by general government as, if they
are, they will be included in this latter sector), and
from property income. If occasional sales cover more
than 50% of their costs of production, the NPISHs in
question must be sectorised as non-financial or
financial corporations, as the case may be.
© Mediterranean Capital Management. All Rights Reserved. 14
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