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Spain's bad bank is reconsidering its strategy, Economy Minister says

MADRID (Reuters) - Spain’s Economy Minister Nadia Calvino on Monday said that the Spanish bad bank Sareb was reconsidering its strategy and role given the sustained losses it has booked in recent years.

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“We are currently considering what the strategy should be for the entity from now on,” Calvino told a financial event in Santander asked about Sareb’s future.

The institution, set up to take on bad loans from the financial crisis in 2012 and known by its Spanish acronym Sareb, has been struggling since its creation as a slump in real estate prices has depressed the value of loans and assets.

“We have to try to design a strategic plan that will be as positive as possible for the coming years,” she said.

In 2020, Sareb booked a loss of 1.07 billion euros ($1.27 billion) while revenues fell 38% in a year marked by a 10.8% economic contraction in Spain because of the COVID-19 pandemic.

“Sareb is a legacy of the previous financial crisis (...) we need to consider how we can improve the future of this institution,” the minister said.

As the pandemic is putting additional strain on Sareb, its shareholders - the state and the country’s main banks- are working with the government to find a way to allow them exit Sareb’s capital structure, two sources familiar with the matter told Reuters in May.

Last month, shareholders agreed to convert 1.43 billion euros of Sareb’s subordinated debt into equity to bolster its books as losses have eroded its capital base.

Spain’s state rescue fund FROB holds a 45.9% stake in Sareb, while the rest is owned mainly by banks, Santander being the largest private shareholder with a 22.2% stake.

After selling 15.9 billion euros of all debt issued, Sareb still holds 35 billion euros in senior debt, which the European authorities recently ordered Spain to count as public debt.

Spain’s overall deficit widened last year to 10.97% due to the reclassification of Sareb’s liabilities.

($1 = 0.8408 euros)

Reporting by Jesús Aguado; editing by Emma Pinedo and Inti Landauro, editing by Louise Heavens