La Caixa who will be one of the first Caja’s to list themselves has been downgraded by the rating agencies.
The rating agency sights new liquidity requirements being implemented this year, rising defaults and cost of funds which squeeze margins as the core reasons for this downgrade.
La Caixa unlike some of its same size competitors also has less activity outside of Spain so are seen as more likely affected by the continuing issues Spain will experience this year with profitability coming under pressure for the foreseeable future.
Current non-resident offerings include 60% loan to value a 3.5% minimum rate for first year, Euribor plus 1.5% and up to 2 years interest only. Like most banks La Caixa are adding a lump sum life cover premium to all loans granted to shore up the profit that can be made on lending.
La Caixa unlike most banks who will fully underwrite and approve an application before valuation also will not underwrite an application before a valuation has been paid for. This means clients run the risk they pay valuation fee only to find finally the mortgage has not been approved. The fact however La Caixa provide a written approval in principle document means clients often think they are approved without understanding the final decision rests with a centrally based underwriter who will not consider the application at all until a valuation has been made.
Whilst unlikely to make them big bucks the bank will make money out of valuation fees whether they finally lend or not.