Asset transformation
Non-performing assets continue to decline, while real estate inventories are increasing more slowly.
| Thousand euro | |||
|---|---|---|---|
| 2014 | 2013 | % 14/13 | |
| Net interest income | (11,192) | 42,085 | (126.6) |
| Net fees | (659) | (2,826) | (76.7) |
| Other income | 15,228 | (6,972) | (318.4) |
| Gross income | 3,377 | 32,287 | (89.5) |
| Operating expenses | (135,824) | (193,726) | (29.9) |
| Operating profit/(loss) | (132,447) | (161,439) | (18.0) |
| Provisions (net) | (1,469) | (301) | 388.0 |
| Losses due to asset impairment | (143,512) | (362,215) | (60.4) |
| Other profit/(loss) | (720,044) | (520,861) | 38.2 |
| Profit/(loss) before taxes | (997,472) | (1,044,816) | (4.5) |
| Ratios (%) | |||
| ROE (profit / average shareholders’ equity) | (39.3) | (39.9) | |
| Cost:income (general administrative expenses / gross income) |
— | — | |
| Loan loss ratio | 61.9 | 56.0 | |
| Loan-loss coverage ratio | 49.8 | 50.8 | |
| Business volumes (€Mn.) | |||
| Loans and receivables | 14,989 | 18,894 | (20.7) |
| Customer accounts | 484 | 466 | 3.9 |
| Real estate assets (gross) | 14,601 | 12,361 | 18.1 |
| Other data | |||
| Employees | 668 | 807 | (17.2) |
| Spanish branches | — | — | — |
T7 Asset transformation
The Group has steadily fine-tuned its approach to managing its real estate and non-performing assets since 2012. In late 2014, the Group split its asset management operation into two areas: Banco Sabadell Asset Transformation and Solvia. Asset Transformation has the primary task of taking an integrated approach to the Group's real estate assets and designing and carrying out its asset transformation strategy. Solvia, the real estate business, focuses on real estate services through all stages of the product cycle — property sales and servicing, land management, preparation and development. It manages real estate portfolios both for the Group and for third parties, and has positioned itself as a key player in Spain's real estate market.
The balance of doubtful assets was reduced and the volume of non-performing loans continued to decline (G1). The Group’s real estate exposure increased by less than it had the year before (foreclosed real estate assets rose by €1,368 million in 2013, while in 2014 the increase was €1,117 million, i.e. 18% less). Sales to the retail market as well as sales of property portfolios to institutional clients contributed to the reduction. Sales of real estate assets in 2014 amounted to €2.744 billion in 2014 (G2), exceeding the target. This was achieved thanks to a change of strategy to reduce discounting and to sell higher-value properties, thereby helping to slow the increase in the Group’s real estate exposure.
The Bank took active steps to tackle housing security issues by engaging with occupiers at risk of social exclusion and acting according to social responsibility guidelines. In 2014 it added 140 homes to the 260 it had already contributed to the Social Housing Fund set up by the Spanish government in the previous year and other homes were made available to housing charities.
For sales to the retail market, the Group can boast one of the best real estate servicing companies in the industry: Solvia Servicios Inmobiliarios. Solvia is currently Spain’s second largest bank-operated real estate web site and the country’s second most widely-recognized brand in the residential property and construction sector, with a brand recognition factor of over 76% (according to the Spanish Public Opinion Institute [IOPE] list for housing and construction) among potential property purchasers at the end of 2014. In November 2014, Solvia won a contract to provide services to a portfolio held by Sareb (Spain’s “bad bank” for non-performing assets); the award was based on its proven real estate servicing capacity (asset administration, sales and development), which will double the size of its managed portfolio and provide it with an additional source of revenues.
G1 Reductions in doubtful assets in 2014
(€Mn.)
G2 Real estate sales
(€Mn.)