–Nationalized Banks To Transfer E45 Billion By Early December
–Other Banks To Transfer Their Bad Loans In 2013

PARIS (MNI) – Spanish banking authorities announced Monday that the
country’s newly formed “bad bank” will buy distressed assets from
troubled real estate lenders at an average discount of 63.1%.

The new Asset Management Company (AMC), or SAREB in Spanish, will
be operational by early December, when it is expected to take E45
billion in non-performing assets off the hands of banks that were
nationalized by the state, including BFA-Bankia, Catalunya Banc,
Novagalicia Banco and Banco de Valencia.

Other banks will transfer their trouble assets to SAREB sometime in
2013, which will increase the total held by the bad bank. SAREB will be
authorized to hold a maximum of E90 billion in bad assets, but the Bank
of Spain’s Deputy Governor Fernando Restoy said at a press conference in
Madrid that he expected the figure to be approximately E61 billion.

Restoy, concerned to protect the value of assets remaining on the
banks’ books, was quick to say that the discounted price at which the
bad loans would be transferred to SAREB should not be considered as a
market price or any kind of reference value.

Spain’s creation of the bad bank was one of the conditions in a
July agreement it signed with its EU partners to obtain aid of up to
E100 billion to help recapitalize its banks. The deal requires that a
bad bank take over the moribund assets of real estate and construction
lenders that take public funds to them recapitalize.

Following better-than-expected bank stress test results in late
September, which showed total capital needs of just under E60 billion,
the Spanish government said it would request only E40 billion from the
EU aid program and that the rest would come from private sources.

Restoy estimated that the transfer of troubled assets to SAREB
would reduce the capital needs of Spanish banks by E5 to E6 billion.

“The creation of SAREB will substantially reduce any uncertainty
with regard to the viability of the institutions that require public
aid, allowing them to concentrate on the management of their principal
business,” Spain’s bank rescue fund, FROB, said in a press release on
Monday.

FROB noted that, “the overall goal of SAREB will be the management
and orderly divestment of the portfolio of assets received, maximizing
their recovery, across a time horizon of 15 years, which is the maximum
lifespan for this company.”

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–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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