Sabadell bank looks to sell on its loans to underperforming companies

BANCO SABADELL is looking for ways of divesting itself of provisions for risky loans.

Sabadell is also negotiating with other financial institutions to create a “bad bank” where they can transfer loans to companies likely to default.

The bank, headquartered in Barcelona and Alicante, is meanwhile contemplating shifting a portfolio of dubious loans, according to sources quoted in Spain’s financial media.

Sabadell has reportedly engaged investment company NK5 to sell the portfolio which includes bad loans as well others to companies that have not defaulted but are feared to be underperforming.

The portfolio is worth approximately €300 million although Sabadell expects to place around €150 million of this, insiders said.

The transaction comes at a time when Spain’s banks are discussing the creation of a “bad bank” where they can offload loans to companies experiencing problems.  They attempted a similar solution during the 2008 crisis with Proyecto Phoenix although with little success.

Bank of Spain permission will be essential for passing on these loans to the proposed “bad bank” that would be managed by doValue, a leading operator in Spain which offers banks and investors services for managing their credit portfolios and real estate assets.

Nevertheless, the same sources have expressed their doubts about the success of this project, which explained why the banks were considering alternatives that included selling on their risky loans.

The outcome of the Sabadell project – which was not guaranteed to go ahead, they said – could also prepare the ground for Spain’s other high street banks.

Its loan to Naviera Armas – which operates ferry services in Spain and mainly operates in the Canary Islands as well as routes to North Africa – is the principal exposure that Sabadell hopes to jettison. Santander and CaixaBank as well as Sabadell, granted the shipping company a €94.5 million loan, with a guarantee from the state-owned Official Credit Institute (ICO).