What's that song they sing about smiling when its OK - even when it isn't, or maybe it's just carry on regardless because that's exactly what Spain's new bad bank is doing when it comes to selling property.
Despite the fact that it is still at the centre of an international row over what some call a flawed business plan, the bank has still announced plans to sell the first batch of the £37 billion worth of property it took off the hands of Spain's troubled banks.
Known by its acronym, SAREB announced yesterday that it is putting 13,000 properties absorbed from rescued lender Bankia.
Set up as a condition of Spain's receiving European rescue funds, SAREB has scooped up £37 billion worth of land, foreclosed homes, half-built developments, and developer loans from four nationalised banks. The lenders received bonds in return, but also got their hands on their share of the rescue funds to rebuild their capital.
But while this relief looked great on the surface, behind the scenes is a lot of uncertainty over how this miracle-working bank is working its miracles. For example nothing has been put in place yet for the bank's management of the assets, and the lenders are still currently managing them. For example the 13,000 in the announced sale are still being managed by Bankia, and being marketed under its website Bankia Habitat.
The bank has confirmed that the business plan, which was drawn up before Spain's healthier banks put forward capital for SAREB, is being revised.
"The business plan is being adjusted because of the evolution of the portfolio, as we now have all the details about what it contains," a spokeswoman for SAREB said.
She added that SAREB's projected annual return on equity target of 14-15 per cent would not change as a result, nor would any of the discounts applied to the assets when they were transferred from the banks to SAREB.
The European Commission, the European Central Bank and the International Monetary Fund on Monday all urged SAREB to ensure it had a comprehensive long-term business plan, as they reviewed Spain's implementation of financial reforms.
"It is of the utmost importance that this plan is kept both robust and credible, based on updated information," the commission and the ECB said in their report.
The IMF added that SAREB needed the "robust implementation" of servicing agreements to safeguard the value of its assets.
Once it has hammered out its business plan, SAREB has said it may look at revaluing some of the assets that were valued as part of larger portfolios. This could be done by assessing a sample portfolio, although it could take many months.
"It took us a month to individually value 10,000 housing assets, and that was without going to visit the properties," said one real estate valuations expert in Madrid, who declined to be named. "Multiply that many times over to get to the scale of the challenge at SAREB."
- Wednesday 06 February 2013