Real-estate activity in Spain
2015
Net attributable profit
€ -492 M
-45.4% vs. 2014
Net exposure*
-9.6% vs. Dec14
-1.2% with CX
* According to Bank of Spain's transparency scope (Circular 5/2011)
Negative contribution of the area to earnings continues to decline
Reducing loan-loss and real- estate asset provisions
Improved risk indicators
A detailed explanation of the aforementioned business area can be found in the Management Report.
Definition of the area
This area provides specialized management of the Group's real-estate assets, including foreclosed real-estate assets from both residential and developer mortgages, the developer loan business and other related assets. Management of properties for BBVA's own use is excluded from its scope.
Management priorities
Real-estate activity in Spain has a dual mission in BBVA Group's real-estate business:
- To guarantee the reduction in the real-estate stock, minimizing losses.
- To support the know-how for the generation of new finance business for transactions with real-estate collateral, providing the expert knowledge for the valuation and management of this kind of collateral throughout the life cycle of the transactions.
With this twofold goal, real-estate activity in Spain will contribute to the Group's transformation process, providing value in at least four of the strategic priorities defined at the global level.
1. Strategic priority 4: To optimize capital allocation
Through the reduction in real-estate exposure and management of the recovery of the portfolio's value.
2. Strategic priority 3: To create / associate with / acquire new business models; and strategic priority 6: To develop, retain and motivate a first class workforce
Real-estate intelligence for new business models and first-class human capital: design of policies, processes, procedures and tools for managing balance sheets with underlying real-estate assets.
The goal is to contribute value to the group
3. Strategic priority 5: To adapt the model, processes and structures to achieve an unrivaled efficiency
Leadership in efficiency: redefinition of the control and governance structure and management model linked to decision-making.
The portfolio to be managed is diverse and varied. This is why different management lines need to be combined, based on the nature of the assets and the alternatives available on the market, to enable effective divestment processes.
The following has been identified in this regard:
a) The following types of assets:
- Outstanding loans: healthy loans or loans that are expected to become healthy.
- Assets that need to be provisioned legally, materially and/or commercially as a preliminary step for their recovery.
- Assets to be sold, which includes the entire finished product and land that due to its size/characteristics should be sold.
- Assets that require prior transformation in order to recover their value; in general, work in progress and medium-sized or large plots of land. In these cases, in today's market conditions, the sales value of undeveloped property is estimated to be much lower than the developed product's value.
- Management of investees from Unnim and CX, as well as the stake in Metrovacesa.
b) The following management lines or levers:
- Management and control of new foreclosures or auction assignments.
- Boosting sales by focusing on specialized plans according to the nature of the product (finished product/land) and type of channel (retail/wholesale).
- Management, transformation and bringing into operation of work in progress and land (when selling this type of assets is not possible or advisable).
