It was announced yesterday that the German Bank DB is buying a portfolio of asset backed loans from the Spanish bad bank SAREB.
The sale value of $ 435 million includes a number of
commercial loans backed by the likes of, shopping centers and tourist attractions
along with a number of loans made to developers.
The sale highlights the way in which the retail part of a
Bank operates in comparison to its investment arm.
The sale clearly shows the investment side of the Bank has considered
Spain, at the right price, a good bet and that the country despite its continuing
pressures is starting to come out of the doldrums and that property may yet
once again be a good investment for the future .
The retail side of Deutsche
Bank
Let us compare the view of the investment arm of DB to the Spanish retail arm, DB
Spain just this year pulled out of nonresident lending in Spain unless the
applicant earned their income in Euros or were Scandinavian. Citizens of the UK were precluded from
borrowing and for Scandinavians DB put together an ill thought out, complicated
currency mortgage which I doubt has many takers.
The rationale for making this move was highlighted as a
concern by Germany DB over the increasing default and repossession ratios along
with a general pulling back from any aggressive lending.
Currency fluctuations was rather bizarrely blamed for why UK
residents were defaulting on loans although a long hard look at how they used
to underwrite and validate cases would have been a much better indication of
why the problems had occurred.
Why this year
The big question has been why did DB retail chose this year
to pull away from Spanish lending. Since the crisis began DB along with all
Spanish Banks had become far more stringent on their criteria’s and their checks,
had lowered maximum loan to values, pulled away from lending solely against
valuation level, and reduced the introducers they would work with.
The outcome of these measures was that the performance of
all loans granted since 2009/2010 was very good with low to no defaults.
Defaulting loans whilst high, all came from the previous era but because the process of repossession takes so long in Spain the figures whilst looking bad on the surface
related to activity undertaken many years ago not the situation as it is today.
The decision was very much behind the curve.
Will things change
It can only be hoped that if the German parent is starting to
see value in Spain again that at some point next year DB retail Spain will be
able to reverse its lending decision and come back into the retail mortgage
market. Perhaps they will take advice from their investment arm!
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