2009 10
Santander is placing real estate with its employees
Published by MartinVarsavsky.net in General with No Comments
Santander from Spain is one of the most valuable banks in the world by market cap. Indeed if it were a US bank it would be the third most valuable bank in America. That is truly remarkable for a Spanish bank. But today I read a piece of news that intrigued me. That in order to get rid of real estate that it got as a result of bad loans it sells apartments at a discounts to its employees and relatives of its employees. Personally I think that having a loan portfolio that is exposed to your own employees is not a great idea. Neither is the concept of favoring your employees over your customers or anyone else for that matter. If I were a shareholder of Santander I would just want Santander to sell its real estate at the best available price in the marketplace.
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chinaski on May 11, 2009 ·
I think they cannot sell them in the open market because there are so many properties unsold. So they thought they might lure some of their employees offering them a “discount” if they tried to sell all that real state they might have to “discount” even more as all sales have halted.
@Gergana. I think you have missed the point.
Dani on May 11, 2009 ·
Chinaski, I think what Gergana means is that it is very likely that the process for selling the properties might not be fully transparent. i.e. the “best” or “cheapest” bargains might go to Santander’s top officers instead of having an open auction kind of process. Knowing how Spanish companies work, I wouldn’t be surprissed to see this happening either (of course at the expense of Santander’s shareholders)
nemo on May 11, 2009 ·
I agree with chinaski. In other conditions, five years ago, that would be a HUGE present for their workers (like the discounts Renaults have been always giving to their workers – 20% when buying the cars they build). But nowadays, they have a big stock, they know they have to lower the price to shell it, and I do not really know if they are favoring their workers or bribing them. More than a year with real state sells = 0 and new builds = 0 in Spain.
Alejandro on May 21, 2009 ·
This has been a common practice in the Spanish banking system for a long time. It may even make a lot of sense, especially in difficult times, for a big financial institution do this. Not only you have a much better grasp of the credit risk you are incurring; you actually control it.
This allows you to give very favorable credit conditions, to compensate for a price that would be difficult and costly to get in the open market. This is very good for your books.
Jaime GM on May 23, 2009 ·
As I see, the strategic position that BSCH is taking is the only way that they have to leave flats business quikly, take the money and put it again in the market to recover losses. At the end of the day their business is banking and investments.
Adan on May 25, 2009 ·
Not such a bad idea. As a shareholder I think I would be happy with the fact that loans are being made, and the mortgagors will most likely be tenured employees with steady income. Even if things gone wrong, the banks will hold consensual security interests in the properties. They can always reposses and sell at the marketplace if conditions are favorable.
Mercado de divisas on May 26, 2009 ·
I thinks this is not a good option for the consumers, bad that they can do what ever they want as always….
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Gergana Lagro on May 11, 2009 ·
Well, what better way for the managers to transfer some of the bank’s wealth to their own relatives… And I guess those with the most cash to make a sizeable (and very cheap) investment are the guys close to those making this decision. Then sell the properties at market price and voila – the bank’s profits transferred to your relatives. The level of nepotism in Spanish companies is flabbergasting at times!