Download - Secured Distressed Debt in Spain as of August 31st 2013

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

© Todos los derechos reservados. Ninguna parte de estedocumento puede ser reproducido, almacenado encualquier sistema de almacenamiento y recuperación dedatos, o transmitido en cualquier forma o por cualquiermedio, electrónico, mecánico, mediante fotocopia,grabación o cualquier otro, sin el permiso expreso previopor escrito de Mediterranean Capital Management S.L.

© All rights reserved. No part of this document may bereproduced, stored in a retrieval system, or transmitted inany form or by any means, electronic, mechanical,photocopying, recording or otherwise, without the expressprior permission of Mediterranean Capital ManagementS.L. Reference to any information, opinion or othermaterial in this document should clearly state

Copyright

2

por escrito de Mediterranean Capital Management S.L.Cualquier referencia a cualquier información, opinión ocualquier otro material contenido en el presentedocumento deberá indicar claramente MediterraneanCapital Management como fuente.

material in this document should clearly stateMediterranean Capital Management as its source.

© 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

[email protected]

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.


Barcelona, November, 28th 2013


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




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




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




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




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



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.



© 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 :




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




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




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.

Download - Secured Distressed Debt in Spain as of August 31st 2013

Top Related