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Nationalized lender Novagalicia has joined BBVA and Cajamar in announcing that it is stripping so-called interest-rate floor clauses from outstanding mortgage contracts, effective as of May 9, the day on which the Supreme Court ruled such conditions to be null and void.

Home in Spain 300x200 - Novagalicia removes interest-rate floor clauses from home loansFloor clauses limit the extent to which borrowers can benefit from falls in the benchmark used to set variable-interest mortgages, which in the case of Spain is habitually the one-year Euribor rate.

The Supreme Court determined that within the context of a mortgage contract as a whole such causes included in the fine print of documents lacked the transparency required by the law.

Novagalicia’s decision affects 90,000 contracts and mortgage debt totaling 6.6 billion euros. The bank said it has ceased to issue home loan contracts since the start of 2011.In a statement to the National Securities Commission (CNMV), Novagalicia said if interest rates remain at their current level, the impact of the removal of floor clauses on its earnings would be 48 million euros, the equivalent of 6.7 percent of its net interest income last year.
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The Spanish economy shrank by 0.3pc between July and September, marking the fifth consecutive quarter of contraction.

danger crisis 263x300 - Spain sinks deeper into recession in third quarterSpain is buckling under the pressure of a large deficit and a property crash that has left its banks struggling under a mountain of bad loans.

Swingeing spending cuts and tax rises have stifled investment and have left consumers without the money or the will to spend.

The third-quarter data from Spain’s national statistics office was a first estimate of GDP with no detailed breakdown. Despite the decline, it reflected a slightly better performance than the 0.4pc fall in GDP economists had predicted.

However, economists said the figure was likely to have been flattered by consumers bringing forward purchases to beat the VAT rise in September, partly veiling a weak consumer backdrop.

“Domestic demand likely contracted sharply again, despite some spending being pulled forward ahead of the VAT hike,” said Greg Fuzesi, economist at JP Morgan. “Our forecast anticipates an intensification of the Spanish recession at the turn of the year.”
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Banco Santander’s net profit in the first nine months of the year plunged 66 percent from the same period a year earlier to 1.804 billion euros, as Spain’s leading bank stepped up provisions for its exposure to the ailing domestic real estate sector.

el banco de espana se plantea la posibilidad de crear un banco malo 300x191 - Banco Santander earnings hit by real estate provisionsSantander said Thursday that in compliance with government decrees issued in February and May of this year it had charged a net 3.476 billion euros against earnings for potential losses from real estate assets, 90 percent of the requirements dictated by the decrees.

The bank said it had reduced its exposure to the real estate sector from 42.5 billion euros at the end of 2008 to 26.5 billion as of the end of September.

Spain has been granted a loan of up to 100 billion euros to clean up the balance sheets of its banks because of their exposure to the property sector, which went into a tailspin around the start of 2008 after a giddy decade-long boom. The government is setting up a bad bank to absorb up to 90 billion euros in toxic assets from the country’s banks, mainly related to the real estate sector.
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Swedish property buyers have become the target of a new property sales drive on Spain’s Costa del Sol after a conference headed up by Malaga real estate representatives in Stockholm earlier this month decided they would push to sell 40,000 properties to the Swedish market.

IMG 0552 300x225 - Spain is looking for Norwegians property buyersTourism director Elias Bendodo and tourist board manager Arturo Bernal liaised with Swedish promoters at the Living Costa del Sol conference in Stockholm drawing up a new deal to encourage Swedish, Norwegian, Finnish and Danish property buyers to purchase holiday or second homes on the Costa del Sol.

On the other hand, plans were recently unveiled by health chiefs to turn the Andalucian city of Malaga into a prominent destination for global healthcare by drawing patients to clinics and hospitals where some of the best surgeons reside.
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The ‘bad bank’ could help save a large number of companies that suffer from the effects of the stagnation on the real estate market in Spain.

For this reason, nobody in the sector wants to let go of this opportunity and everyone is taking positions to be involved in the new entity in one way or the other. Certainly, the state-backed bank rescue fund, the FROB, does not pay much, but little is better than nothing, given the state of the market.

banco de espana 300x225 - Real Estate sector and the bad bankThe last ones to have claimed their participation in the new entity are the developers, which are probably among the most affected by the crisis. Their argument is that they are the ones who really know the market and, for that reason, are the best to evaluate the assets that will be transferred to the bad bank.

“The FROB, or whoever will have the mandate over these assets, must increase the management capacity and for that reason, it must take help from the sector,” said José Manuel Galindo, head of the Association for Developers and Constructors in Spain (APCE).

The real estate assesors also want to participate. The main companies in this sector, such as Tinsa, Sociadad de Tasación and Valmesa, aspire to get hired to assess the assets of the nationalized entities –in principle, only these entities- that will be transferred into the new instrument.
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