Assets Under Management Assets Under Management

Report Assets Under Management Assets Under Management. Ed. III Ed. Management. Under Assets

Barcelona Boston Frankfurt London Madrid New York Sao Paulo

April 2019, Barcelona axiscorporate.com Axis Corporate

Edition: April 2019 April Edition:

©Axis Corporate ©Axis

Department Branding and Marketing Corporate

Edit

Joan Carbonell Joan

Luis Fernández de Nograro de Fernández Luis

Daniel Meere Daniel

José Masip José

Partners Estate Real and Services Financial

Casimiro Gracia Gracia Casimiro CEO Table of Contents

p. 05 P. 06 INTRODUCTION Executive Summary and TRENDS

P. 08 P. 19 Current Current Situation Situation IN Europe IN SPAIN

p. 31 p. 38 ASSET servicers HOLDERS

p. 45 p. 50 Real Estate APPENDICES Investment Trusts (REITs)

2019 Axis Corporate 3

Introduction Assets Under Management Report

The outlook for economic growth in the real estate sector this year is positive, albeit overshadowed by political uncertainty in Europe and the continued challenge of disposing of the toxic assets which still weigh significantly on financial sector portfolios. The real estate market is continuing on the road to recovery, José moving towards sustainable levels of demand and the Masip financial and legal stability provided by a cohesive political and Financial Services and Real Estate Partner economic framework.

We are pleased to bring you the third annual The report then addresses the economic edition of Assets Under Management Insight, situation in Spain and the way in which supply based on the privileged intelligence that we and demand affect the real estate sector. have gained through working with most of the major asset holders and servicers in the This review of the economic outlook is followed domestic market. This report is intended to by an examination of the major market provide an overview of the status of assets players: Asset Holders, Servicers and REITs. Daniel This focuses on their positioning and ranking Meere under management (non-performing loans) and the real estate sector. according to their financial and real estate UK Managing Director assets, the purchase and sale of portfolios and, The opening executive summary presents key in a new feature in this edition, a review of the findings from our research, which enable us to transactions expected for 2019. prepare a detailed breakdown of the current status and the trends affecting the This study is the result of extensive work in compiling and interpreting data collected from major players in the real estate market. This major players in the sector and a variety of is followed by analysis under five headings: public sources. Europe, Spain, Asset Holders, Servicers, and REITs. We hope that you find this document interesting and useful in providing a The review of the status in Europe is focused on comprehensive view of real estate asset examining financial and real estate assets in the management. countries with the highest levels of debt and how this debt is distributed amongst the major financial institutions, with key indicators.

2019 Axis Corporate 5 Executive Summary and Trends Executive Summary and Major Trends of 2019

Along with developers, real estate investment trusts (REITs), and investment funds, servicers continue to play an important role in the real estate sector and in Spain’s economic activity.

Not only is their service orientation and role in stimulating the market being consolidated, it is also evolving as they bring on board new services and business models.

In 2018 servicers were characterised by an improvement in their structure, professionalisation, and specialisation (as was revealed in the last edition). They have transitioned from managing banks and savings banks to managing entities whose networks market assets that increasingly come from multiple players.

In establishing their own identity, the strategies implemented by servicers have included joining the digital world (introducing home valuation services for obtaining mortgages, marketing through e-commerce giants like Amazon, or using inbound marketing techniques, among others), investing in technology and reinventing their business models.

Today, most servicers are backed by investment funds giving them much greater flexibility to act, diversify their operations and execute tactical plans. This trend is expected to continue over the coming years and to lead to further mergers and acquisitions.

Despite the financial sector’s moderate recovery and stability, financial institutions will still have to divest a large number of toxic assets in their portfolios.

The market has seen consolidation into a smaller number of real estate developers and investment funds that view the real estate sector as a promising investment opportunity, and this has led to greater market specialisation.

Similarly, a more concentrated and digitalised banking sector could help improve cost efficiency. Cross-border mergers and acquisitions could help stimulate banking integration as could other measures, such as harmonising tax and insolvency regulations.

This year will be characterised by greater market consolidation due to large transactions (the purchase of portfolios in Spain in 2017 was up by 547% year on year). This trend emerged primarily out of banks’ need to divest toxic assets in order to comply with regulatory requirements from the Central European Bank, as well as from the real estate market’s positive response to acquiring these assets.

6 Assets Under Management REPORT The eurozone is on the road to recovery with an average growth rate of 2.3% and falling unemployment.

Europe is expected to see slower growth in 2019 than in the previous year. In addition, the amount of toxic assets will continue to be an issue that will not help either inflation or growth.

As for the NPL ratio, this year has seen a general improvement over last year with the European average sitting at 6.89%.

Banking returns are low, primarily due to the amount of toxic assets, but also because of the need to manage legacy issues (financial institutions that buy others are inheriting unforeseen liabilities).

Some of the challenges that Europe faces this year are: • Proper management of Brexit with the least possible impact on the euro zone. • Reinforcing and strengthening the euro against the appreciation of safe-haven currencies due to a global slowdown. • The possibility of a moderate increase in interest rates from the third quarter of 2019. • Uncertainty and instability along the political axis.

The Spanish economy is expected to see a downturn of up to 2.2% over the coming year.

The primary factors influencing this downturn are unstable economic policy, political uncertainty, government debt nearing 100%, the highest public deficit in the eurozone, and a 14% unemployment rate.

A slowdown is predicted in private consumption due to the imminent increase in social spending and taxes as well as the lack of job creation.

The real estate sector in Spain is seeing positive progress thanks to digitalisation and the use of new technologies such as big data, automation and a broader range of online offers. Nevertheless, although there has been steady growth of mortgage loans year-on- year, household borrowing continues to fall. In fact, the increase in house prices has been driven by strong demand and underpinned by a recovery in personal incomes. And although nominal growth in residential real estate prices has accelerated (reaching a year- on-year rate of over 4% in 2017), it has remained below historical averages and well below pre-crisis figures

The rental sector, which an increasing number of funds and large developers view as a good investment opportunity in the face of rising prices, continues to experience an upward trend with a notable increase in players.

2019 Axis Corporate 7 1

Current Situation in Europe

Greece, Cyprus, Italy and Portugal are new emerging markets for NPL investment and management in the short term, but whether they will take off depends on their macroeconomic performance. 8 Assets Under Management REPORT Current Situation in Europe Macroeconomic situation in Europe: an analysis based on NPL ratios

Europe continues to experience a robust recovery, with The economic upturn has enabled banks to strengthen their unemployment down to pre-crisis levels and growth at 2.5%, balance sheets and helped significantly reduce solvency issues. resulting in a strong economy that is growing faster now than at any Against a backdrop of low interest rates, regulatory measures to point in the last 10 years. reduce banking risks and toxic assets have stabilized Nevertheless, a number of member states are still burdened by their returns with higher turnover and lower asset impairment high amounts of government debt, reducing their future investment charges. capabilities. The situation in countries like Italy, whose budget has raised the deficit by half a point (currently 131% of GDP), or Spain, where the national debt has hit a record high of 98% of GDP, will force investors to seek out returns in other countries.

Assessment of each country based on three indicators 1) 2018 NPL ratios (year-on-year change)1 1.9% (0.5) 1.5% (-0.1) 2) 2018 unemployment rate (year-on-year change) 4.0% (0.0) 7.2% (-13.2) 1.5% (1.2) 2.5% (2.5) 2 3) 2018 GDP (year-on-year change) 1.0% (0.1) 6.0% (-6.3) 2.4% (2.7) 1 Except Poland, Lithuania and Germany, where 0.7% (0.1) figures are for 2017 compared with 2016. 5.2% (-7.1) 2 Except for Cyprus, Bulgaria and Romania, 3.7% (3.5) where figures are for 2017 compared with 2016.

4.1% (0.4) 6.4% (0.1) 4.8% (-9.4) 7.2% (-12.2) 0.5% (2.0) 4.4% (2.1)

0.7% (-0.2) 3.2% (-0.1) 4.1% (-6.8) 6.2% (-8.8) 10.6% (-0.1) 1.5% (1.8) 3.8% (2.4) 5.3% (-14.5) 3.9% (0.0) 9.1% (5.0) 3.4% (-20.9) 2.1% (0.2) 5.0% (3.1) 3.4% (-5.6) 2.1% (-0.1) 1.9% (2.2) 3.7% (-15.9) 3.4% (-0.2) 2.5% (-0.2) 3.0% (2.2) 2.3% (-4.2) 3.6% (-0.1) 6.3% (1.6) 2.4% (2.5) 6.6% (-10.8) 1.7% (1.5) 3.9% (3.1) 0.9% (0.1) 2.3% (-0.1) 5.0% (-7.4) 4.9% (-9.2) 3.1% (2.4) 2.6% (2.0) 3.5% (-0.4) 3.8% (0.0) 3.1% (-0.1) 4.7% (2.3) 9.3% (2.2) 6.2% (-0.3) 1.5% (1.2) 4.1% (-10.9) 7.3% (4.8) 12.8% (-0.2) 2.7% (-0.4) 6.6% (-16.4) 5.2% (-7.1) 11.3% (-0.2) 2.4% (1.9) 4.3% (3.1) 8.2% (-15.5) 9.6% (-0.3) 2.7% (3.5) 5.3% (6.0) 4.4% (-0.1) 3.8% (3.9) 14.9% (-9.7) 2.5% (3.3) 9.9% (-0.4) 10.1% (-7.3) 0.8% (1.1)

38.9% (-0.2) 7.4% (-28.9) 46.0% (0.2) 4.2% (4.8) 18.9% (-9.1) 4.1% (-0.2) 1.8% (-0.2) NPL ratio 3.8% (-2.6) 5.6% (5.2) ≤ 12.5% ≤ 25% ≤ 37.5%

2019 Axis Corporate 9 Current Situation in Europe Macroeconomic situation: countries ranked by 2018 NPL ratios

In just the first three quarters of 2017, eurozone banks reduced their assets by 119 million euros. This is reflected in positive NPL trends, with defaults in countries like Cyprus, Portugal and Ireland significantly down over the last four years, and higher sales of toxic assets in countries such as Italy, Portugal, Greece and Cyprus. Europe is therefore continuing to work towards meeting banking supervisors' expectations regarding 50 NPL ratio % identifying, managing, valuing and writing down toxic assets. However, the European economy is forecast to slow (GDP growth in most European Union % countries is now declining), and a change in monetary policy is expected, putting downward % 40 pressure on monthly rates of asset purchases towards the end of 2018. 46.0 % 44,8 38.9 30

20 %

10 % % % % 12.8 11.3 % % 9.6 9.9 10.6 % % % % 6.4 % % % % % 6.2 % % % % % 1.9 % % % % 1.5 % % 1.0 4.1 0.7 0.7 0.9 3.9 4.4 4.1% 3.5 3,4 3.5 3.2 3.6 3.1 2,7 2.5 2.3 0 2.1 2.1

Italy Malta Greece Cyprus Croatia Ireland Latvia Spain Poland Iceland France BelgiumAustriaHolland NorwayFinland Estonia Portugal Bulgaria Romania Denmark Slovakia Hungary Lithuania Slovenia Germany Sweden Luxembourg Czech Republic United Kingdom Analysis focus: the top six countries for NPLs.

Top 6 countries by NPL ratio, GDP change and unemployment rate

GDP change % Unemployment (diameter) 10% 5.3% Ireland

4% Croatia 7.4% Cyprus

8.2% 2% Portugal % 6.6 18.9 % Greece 10.1% Italy 0%

0% 10% 20% 30% 40% 50% 60% NPL (%)

-2

Source: European Central Bank Annual Reports, es.statista.com and www.datosmacro.com. INE (Spanish National Statistics Institute), ECB (European Central Bank) and www.datosmacro.com.

10 Assets Under Management REPORT Greece A REBOUNDING ECONOMY WITH AVERAGE WAGES AND A HIGH UNEMPLOYMENT RATE

Banks ranked by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral

(1) Collateral (%) Financial NPL ratio Distressed portfolio (€m) (Diameter) Institution 24,000

34% Piraeus Bank 20,721 22,000 68% Piraerus 20,000 Bank Alpha Bank* 16,400 35% 18,000 35% Alpha Bank* 33% 16,000 National Eurobank* 15,800 % % 35 34 Bank of Eurobank* Greece 14,000 National Bank 15,300 43% of Greece 12,000

0 0 5,000 10,000 15,000 20,000 25,000 30% 35% 40% 45% 50%

Distressed portfolio (€m) NPL ratio (%)

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Piraeus Bank -15% -6% N /A N /A N /A N /A 90% 8%

Alpha Bank* -28% 1% -1% 0% -1% 0% 23% 5%

Eurobank* -10% -4% -7% N /A 0% N /A N /A 2%

National Bank 21% 28% 9% N /A -15% N /A 10% 34% of Greece

After a long period of uncertainty, with approximately 300 billion euros in loans, late payments and “corralito”-like measures taken to prevent a run on the banks Greece has managed to emerge from its third bailout. Although the country has made notable progress, it still has to consolidate its growth and make its finances more sustainable, which is why the European Commission, the International Monetary Fund and the European Stability Mechanism will continue to monitor the Greek economy. Furthermore, Greece’s debt is almost twice its GDP, it has a 20% unemployment rate (although it is down year-on-year, it is still one of the highest among EU countries), a poverty rate nearing 36% and an NPL ratio up 0.7% on 2017. There is still much room for improvement.

Source: consolidated annual reports from the financial institutions. Figures for 2017 except those institutions marked with (*) whose figures are for 2018. (1) Collateral corresponds to mortgage collateral for all financial institutions.

Axis Corporate 2019 11 Current Situation in Europe Cyprus OUTLOOK FOR IMPROVEMENT IS GOOD, WITH UNEMPLOYMENT AND DEBT RATIOS CONTINUING TO FALL Bank ranking by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral

Financial NPL ratio Distressed portfolio (€m) Collateral (%) Institution (Diameter)

Bank of Cyprus Public 37% 8,000 Company 6,90 7,000 % 17 46% Cooperative 6,71 59% 6,000 Bank of Cyprus Central Bank Public Company 5,000 Cooperative Central Bank Hellenic Bank 43% 4,000 2,100 Public Company 3,000 Hellenic Bank 2,000 27% 75 RCB Bank Ltd 0.2% Public Company 1,000 99.3% RCB Bank Ldt 0 0 2,000 4,000 6,000 8,000 0% 20% 40% 60% 80% -1,000 Distressed portfolio (€m) NPL ratio (%)

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Bank of Cyprus Public Company -17% -11% N /A 10% N /A 10% -7% 13%

Cooperative -7% -2% N /A N /A N /A 3% -58% 4% Central Bank

Hellenic Bank Public -16% -26% -5% -23% 1% -18% -6% 18% Company

RCB Bank Ltd 25% -74% 2% -4% 6% 0% N /A 19%

Cyprus's economic recovery has accelerated in recent years and forecasts for the medium-term are favourable, primarily due to an improved labour market, with unemployment cut by 6.7% over the past two years. In terms of debt, Cyprus has continued to trim its debt-to-GDP ratio, which now sits at 94.7%. Both the IMF and the European Commission view the medium term positively as long as the economy continues to meet the targets set.

Similarly, the banking sector has drastically improved asset quality, bringing its NPL ratio down by 4.2%, an achievement that is not only being recognised and supported by European institutions, but also met with the approval of the big rating agencies. For example, although the Bank of Cyprus is the banking institution with the largest distressed asset portfolio, its NPL ratio is comparable to that of many European banks.

Source: consolidated annual reports from the financial institutions. Figures for 2017.

12 Assets Under Management REPORT Portugal PORTUGAL STILL NEEDS TO LEARN TO ATTRACT FOREIGN INVESTORS

Bank ranking by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral Financial Institution Distressed portfolio (€m) (1)Collateral (%) NPL ratio (Diameter)

12,000 Novo Banco 31% 9,594 Novo Banco 10,000 28% Caixa Geral de 12% Caixa Geral de Depositos 8,145 8,000 46% Depositos

6,000 4,323 Banco Comercial Português 10% % Banco Comercial 4,000 46 Português 1,146 Banco Português de Investimento* 5% 2,000 Banco Português de Investimento* % 581 Montepio 8% 49 0 51% Montepio 0 2,000 4,000 6,000 8,000 9,000 10,000 0% 10% 20% 30% 40% -2,000

Distressed portfolio (€m) NPL ratio (%)

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE Banco PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Comercial Português -20% 65% -17% 22% -14% 26% -6% 6% Banco Portugés de N /A -8% 0% N /A -2% N /A N /A 10% Investimento*

Caja Geral de Depositos -25% -24% 10% N /A 16% N /A 14% 9%

Novo Banco -15% -9% -30% -36% -33% -5% 1% 19%

Montepio -58% -10% -13% N /A 2% N /A 24% 5%

Four years after the Troika bailout, Portugal’s economic recovery is marked by stable GDP growth since 2013, accompanied by a 5.3% drop in unemployment (down to pre-crisis rates) and growing investment and exports. Furthermore, changes to public finances have enabled the social economy to prosper. Nevertheless, business and household borrowing remain high and non-performing assets amount to 24 billion euros. Portugal’s recovery efforts are focusing on the government deficit with the aim of attracting foreign investors; the deficit fell below 3% by mid-2017 and the target was to reduce it to 0.7% by the end of 2018.

2019 Axis Corporate 13 Current Situation in Europe Croatia GROWING ECONOMY WITH LOW INTEREST RATES TO ENCOURAGE LENDING

Bank ranking by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral Financial NPL ratio (1) Institution Distressed portfolio (€m) Collateral (%) (Diameter) 1600 Zagrebacka a banka 1,306 11% Zagrebacka banka % 1400 2 % Privredna banka Zagreb 1,265 13% 31 Privredna 1200 banka Zagreb Erste & Steiermarkische Bank 787 12% 1000

800 % Erste & Addiko 606 8% 18.4 Steiermarkische Bank 600 N/A N/A OTP Bank 556 6% 400 Addiko N/A Raiffeisenbank OTP Bank Austria 345 Raiffeisenbank Austria 13% 200

0 0 400 800 1200 1600 0% 5% 10% 15% 20%

Distressed portfolio (€m) NPL ratio (%)

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Zagrebacka banka -23% -17% 10% N /A 18% -5% 25% -3%

Privredna -88% -7% 5% -2% 3% -2% -3% 3% banka Zagreb

OTP -30% -35% N /A N /A N /A N /A N /A 7% Bank

Erste & Steiermarkische 10% 9% 4% -2% 3% -3% 3% -10% Bank

Raiffeisenbank -22% -17% N /A N /A N /A N /A N /A -5% Austria

Addiko -20% -12% N /A N /A N /A N /A -23% -1%

Croatia’s economy has grown slightly in the past few years. This growth has been accompanied by a favourable external environment and domestic economy policy measures aimed at boosting both tourism and raw material exports, thereby driving GDP growth. In addition, the expansionary monetary policy maintained by both the Central European Bank and the National Bank of Croatia over the past few years has enabled the country to keep interest rates low and so increase lending, facilitating borrowing secured on Real Estate.

Source: consolidated annual reports from the financial institutions. Figures for 2017. (1) Collateral corresponds to mortgage collateral for: Zagrebacka banka, Privredna banka Zagreb and Erste & Steiermarkische Bank.

14 Assets Under Management REPORT Ireland BREXIT AND ITS IMPACT LOOM LARGE OVER THE STRENGTHENED IRISH ECONOMY

Bank ranking by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral

(1) Financial NPL ratio Distressed portfolio (€m) Collateral (%) Institution (Diameter) Allied Irish 10,000 N/A Bank Allied Irish Bank 10,200 17% 8,000 Bank of Ireland 6,521 8% N/A Bank of 6,000 Ireland N/A Permanent 5,282 Permanent TSB TSB 26% 4,000

EBS Building 1,532 EBS Building Society 2,000 13% Society 97% 0 4,000 8,000 10,000 0 0% 5% 10% 15% 20% 25% 30% 35% Distressed portfolio (€m) NPL ratio (%)

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Bank of Ireland -31% -27% N /A N /A N /A N /A 114% -12%

Allied Irish Bank -28% -26% N /A N /A N /A N /A N /A -2%

Permanent TSB -10% -4% N /A N /A N /A N /A -25% 0%

EBS Building -21% -21% 1% 1% 3% 3% N /A -2% Society

According the European Commission, the Irish economy grew by 4.4% in 2018 and is expected to grow by 3.1% throughout 2019. This growth is driven by increased investment and domestic consumption. These key growth drivers should make the instability caused by Brexit more manageable. We have to keep in mind that the United Kingdom is one of Ireland’s most important trading partners so its departure from the EU may upset its economic forecasts.

In terms of employment, Ireland is at its peak for the last 10 years, having reduced the unemployment rate by 6% and increased the average salary by 2.5% as of the beginning of 2018. Despite Ireland's promising economic data, we must remain cautious because this performance is highly dependent on the decisions of the large multi-national corporations based in the country.

Source: consolidated annual reports from the financial institutions. Figures for 2017. (1) Collateral corresponds to mortgage collateral for the EBS Building Society.

Axis Corporate 2019 15 Current Situation in Europe Italy A SLUGGISH ECONOMY WITH FINANCIAL INSTITUTIONS THAT HAVE YET TO IMPROVE THEIR ASSET QUALITY Bank ranking by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral

Financial NPL ratio Distressed portfolio (€m) Collateral (%) Institution (Diameter) 60,000 Unicredit 48,432 10% 50,000 32% Unicredit Banca Nazionale del Lavoro 39,902 5% % Banca Nazionale Banco Intesa Sanpaolo 6% 40,000 25,464 10 del Lavoro Popolare 49% 13,505 Banco Popolare 17% 30,000 Intesa Sanpaolo Banca Popolare di Banca Milano 12% % 13,032 20,000 42 Popolare Banca Banca Popolare di Milano Popolare 10,533 20% dell'Emilia Romagna Banca Monte dei 58% dell'Emilia 10,000 Romagna Banca Monte dei Paschi di Siena 10,352 Paschi di Siena 12% 54% 64% 0 0 10,000 20,000 30,000 40,000 50,000 0% 5% 10% 15% 20% 25% -10,000 Distressed portfolio (€m) NPL ratio (%)

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE Banca PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Nazionale del 28% 40% 15% -13% 13% -15% -6% 2% Lavoro

Intesa Sanpaolo -14% -27% 18% N /A 5% N /A N /A 4%

Unicredit -14% -14% 2% N /A 3% N /A -18% 1%

(1)Banco Popolare 32% 47% -1% N /A -2% N /A 17% 3%

Banca Monte dei Paschi di -49% -37% -5% N /A 17% N /A 33% 21% Siena Banca Popolare dell'Emilia -8% -10% 15% N /A 10% N /A 0% 9% Romagna Banca Popolare di 4% -28% 64% N /A 15% N /A 29% 5% Milano

After three years of expansion, Italy’s economy is experiencing a slowdown with one of the lowest growth rates among the major eurozone economies (0.8% annually). This sluggish growth has impacted Italy’s debt which is subject to a high risk premium, in addition to the fact that the country's 2019 budget violated European regulations on financial stability. Domestic demand is expected to see an uptick following the announcement of measures to cut taxes and raise incomes; however, asset quality still represents a burden on the balance sheets of financial institutions.

Source: consolidated annual reports from the financial institutions. Figures for 2017 except those institutions marked with (*) whose figures are for 2018. (1)The figures available for Banco Popolare, are for up to 2016 (last period).

16 Assets Under Management REPORT Spain STRONG ECONOMIC GROWTH WITH A FALLING NPL RATIO, BUT THE REAL ESTATE SECTOR CONTINUES TO BE OVERBURDENED BY TOXIC ASSETS.

Bank ranking by distressed portfolio Bank ranking: NPL ratio, distressed portfolio and collateral Financial Institution NPL ratio Distressed portfolio (€m) (1) Collateral (%) (Diameter) Santander* 37,408 4% 45,000 BBVA* 16,191 4% 40,000 55% Santander* CaixaBank* 13,695 6% 35,000 Bankia 9,740 9% 30,000 7,867 Banco Sabadell 7% 25,000 3,695 Cajamar 11% BBVA* Unicaja 20,000 2,710 9% CaixaBank* 28% Ibercaja 15,000 2,565 8% % Banco Sabadell 39 Bankia

2,165 Kutxabank 5% 10,000 % % 57 64 Unicaja Cajamar 2,030 Bankinter 4% Bankinter Kutxabank 5,000 60% Liberbank 57% 70% % % 1,900 9% % 56 66 0 56 Abanca 1,541 5% % -5,000 2% 4% Abanca 6% 8% 76 10% 12% 0 10,000 20,000 30,000 40,000 Ibercaja Distressed portfolio (€m) NPL ratio (%) Liberbank

YEAR-ON-YEAR CHANGE

DISTRESSED NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL PROVISIONS COVERAGE PORTFOLIO COLLATERAL COLLATERAL COLLATERAL (%) COLLATERAL (%) RATIO Santander* 8% -1% N /A 9% N /A 8% -1% -1%

BBVA* -21% -8% -9% N /A -5% N /A N /A 3%

CaixaBank* -4% -3% -1% N /A -1% N /A -9% 10%

Banco Sabadell -19% 8% -10% 5% -8% 7% 4% -6%

Cajamar -12% -19% 15% -12% 13% -13% -70% 1%

Liberbank -40% -38% -3% -3% -2% -2% 19% 9%

Abanca -28% -31% -4% 2% -9% -3% -24% 2%

Kutxabank -27% -26% 2% 0% 3% 1% 1% -13%

Bankinter -12% -14% N /A 0% N /A -3% 34% -9%

Unicaja -16% -11% -5% N /A -5% N /A 92% 0%

Bankia -9% -9% N /A 17% N /A 17% 45% -7%

Ibercaja -16% -14% -3% -3% -1% 3% -9% -3%

The Spanish economy is experiencing strong, sustained growth, but this growth may be undermined by the policies announced to raise taxes and increase government debt (it was expected that Spain's excessive government deficit in recent years would end in 2018). The growing strength of the banking sector was confirmed in 2017, as evidenced by a year-end NPL ratio of 7.8%, the lowest ratio in recent years and the fourth consecutive year this indicator has fallen. Nevertheless, managing non-productive assets continues to be one of biggest challenges facing the real estate sector as it severely impacts on returns: although much was sold in 2017 and 2018, it is estimated that there are still more than 150 billion euros in toxic assets on the books.

Axis Corporate 2019 17 18 Assets Under Management REPORT 2 Current Situation in Spain

The Spanish economy is staving off a slowdown primarily thanks to government spending, employment and construction. Housing continues to be the most profitable product in the current market. Axis Corporate 2019 19 Current Situation in Spain Market environment indicators

Performance of returns on alternate investments Average rental yield

9.3% 9% % 2015 2016 2017 2018 8.4% 8.3% 8% 7.4% 7.7 % 7.1% 15 7%

% 11.4 10.9 % 6% 10 9.1% % 5.1% 8.9 5.0% 7% 5%

5 4%

1.6% 1.3% 1.6% 1.4% 0.5% 0.1% 0.1% 0.1% 3% 0 2% -2% -5 1%

% -7.2 0% -10 Housing Offices Business Garage -10.0%

Housing (rental income + price variation) Returns 3Q 2017 10-years bond Returns 3Q 2018 Bank deposits Stock exchange (Ibex 35)

Source: Banco de Spain, figures at close Q2 2018 Source: www.idealista.com

Gross rental yield 4.6% 4.6% % 5% % 4.3 4.3% 4.2% 4.4 % % 3.9 % 4.1 % 3.7 3.4 % % % 3.3 4% 3.1 3.0% 3.2 2.8% 2.8% 3%

0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sources: Banco de Spain, figures at close Q2 2018

2017 was characterised by a positive macroeconomic outlook Housing investment remains the most profitable option. Prices underpinned by a European monetary policy with low interest and mortgage lending continued to rise moderately in 2017 and, rates (and therefore very low long-term bond yields). This although growth slowed in 2018, housing continues to generate situation carried over into 2018, but certain factors such as attractive returns. This is demonstrated by the large REITs and an increased equity risk premium and, more recently, an managers that handle portfolios based on building housing announced slowdown in asset purchase incentives from the developments or on rentals, which is the top choice for players ECB and a change in monetary policy suggest that returns will in the real estate market. be affected.

20 Assets Under Management REPORT Housing price changes in provincial capitals from their peak to Q3 2018 Returns on purchases of homes for rental. Figures for September in provincial capitals

-40.4 4.4% -27.4 3.1% -39.7 -43.1 5.1% 4.7% -31.9 -33 3.8% 4.3% -43.5 3.6% -46.5 3.7% -35.8 3.8% 4.3% -29.7 -47.2 4.0% ND -39.5 -56.0 -51.6 -59.0 3.9% 4.3% 4.2% 5.2% 4.2% -56.9 5.7% -35.8 -26.1 4.3% 4.2% -42.8 ND -55.5 4.7% 4.3% 4.0% -51.6 -52.6 5.6% 4.4% -43.1 -56.9 4.7% 4.4% -43.8 3.9% -53.5 -28.9 5.2% 4.8% -54.5 -26.9 5.4% 4.6% -48.9 -49.4 4.8% 4.8% -39.6 4.3% -46.3 5.3%

-53.6 -50.2 4.6% 4.7% -40.1 5.0% -36.3 5.1%

-43.8 -41.6 -40.2 5.5% 4.9% 5.2% -50.1 5.2% -40.0 5.4% -49.7 5.6% -40.1 4.6% -35.6 4.7% -37.2 3.9% -32.2 5.3% 6.0%

Housing price changes Returns on purchases of homes for rental

26.1 a 39.5 39.6 a 48.9 49 a 60 3 a 4% 4 a 5% �5%

Having generated positive returns in 2017, the Ibex 35 delivered negative returns again in the first part of 2018. This fall is primarily due to the slowed global GDP growth forecast by the IMF and the trade war between China and the United States.

Bank deposits have remained stable over the past three years due to the ECB policy in place since 2016. Despite changes in monetary policy, interest rates will remain low throughout the eurozone, which suggests that bank deposits will maintain their profitability in the short term. 10-year bonds continue to offer the same returns they have in recent years, primarily due to the stabilised Spanish risk premium which was not affected by the change of government.

Sources: expansión.com, Tinsa (Real Estate valuations), Colegio de Registradores (Registrars Association), www.fotocasa.com and the INE

Axis Corporate 2019 21 Current Situation in Spain Supply and demand indicators

In 2017, the number of housing Transactions - Mortgages and mortgage transactions 532,261 followed the upward trend that 500,000 457,738 started in 2013, although growth 408,461 401,713 400,000 365,621 432,952 was more moderate than that 400,873 295,725 363,323 recorded in 2016 (most likely 300,000 349,118 300,568 due to market maturity rather 282,418 273,873 than a cyclical change). This 200,000 246,767 199,703 204,302 positive trend shows that there 100,000 is market liquidity and that there is a renewed interest in home 0 2011 2012 2013 2014 2015 2016 2017 2018 buying. Similarly, the number of houses sold continued to rise, Housing transactions but this time more sharply than Mortgages granted in 2016.

Sources: INE (Spanish National Statistics Institute) and the Spanish Ministry of Development. Closing figures for 30 June 2018 Meanwhile, new residential construction was up 26% from 2016 contributing nearly 5% Housing starts to the GDP. New construction permits were also up year-on- 100,000 year, with 22,000 issued. These figures reflect the recovery that 80,000 began in 2014 after reaching historic lows in 2013. 60,000 55,288 45,389 40,000 Despite this increase in housing 35,196 29,748 29,209 28,621 31,174 24,285 supply, house prices rose in 20,000 18,289 15,025 14,934 17,915 19,345 19,285 22,041 14,645 2018, reaching an average of

0 1,317 euros per square metre, 2011 2012 2013 2014 2015 2016 2017 2018 directly affecting the home

New residential construction ownership ratio which fell 0.4% permits New construction year-on-year. This rise affected certifications Construction projects completed not only Spain, but also the Sources: INE (Spanish National Statistics Institute) and the Spanish Ministry of Development. Closing figures for 30 June 2018 rest of the countries in the European Union, another sign that the market is recovering internationally. Housing property in Spain vs Europe

96% 100 % 90,3 % % 90 90 89,5% % % 86,3 85,4 % 83,4 82,7% 82,3% 81,4% 81,2% % % % 80 78,2 77,8 75,2 % % 73,9 72,3 71,3% % 69,8 69,2% 69% Average: euro area 64,9% 63,4% 62% 60 % 55 51,7 %

Italy Malta Spain Poland Latvia Ireland France Austria Croatia Slovakia Estonia Norway Bulgaria Greece Belgium Holland RomaniaLithuania Hungary Portugal euro area Denmark Germany Macedonia

Czech Republic United Kingdom

Sources: Eurostat and public sources for 2017.

22 Assets Under Management REPORT Spain’s positioning compared to the European average

Spain was the fifth ranking 2017 GPD (€m) country in the euro area by GDP in 2017, above the European average. €1,163,662 Furthermore, according to reports from Brussels, Spain's €547,642 economy is expected to grow Average: euro area by 2.1% in 2019 while European average growth is estimated at

Italy 1.3%. This suggests that Spain Spain Latvia Malta France Poland AustriaIreland Finland Greece Croatia Holland Sweden Belgium Slovakia Bulgaria Slovenia Estonia Cyprus Germany eurozone Denmark Portugal Romania Hungary Lithuania will maintain its position among Luxembourg Czech Republic the rest of the major European United Kingdom powers. These growth estimates are driven by robust Average housing price (Q2 2018) consumption and growth in housing construction. However, 2,653€ Spain should not forget that forecasts from Brussels 2,350€ were more favourable at the beginning of the year and that Average: euro area growth has slowed on many occasions.

Italy Malta Spain France Austria Ireland Finland Estonia Croatia Poland Cyprus Greece Sweden Holland Belgium Portugal Slovenia Slovakia Germany Denmark eurozone HungaryLithuania Spain's strong GDP figures Luxembourg Czech Republic United Kingdom are in direct contrast to its unemployment rates. Spain has the second highest Unemployment rate (2017) unemployment rate in the % eurozone just behind Greece 15,8 and seven points above the 8,4% European average. Although unemployment dropped below Average: euro area 15% for the first time since 2008, it remains one of the leading problems Italy Spain Latvia Czech France Ireland Austria Malta Poland Greece Croatia Cyprus Finland Slovakia Belgium Estonia Holland Portugal Sweden SloveniaDenmark Bulgaria Romania HungaryGermany that Spain must address eurozone Lithuania Republic Luxembourg (precarious work, cheap labour, United Kingdom underqualification etc.).

2018 NPL ratios (Poland, Lithuania, Germany and United Kingdom 2017)

6,9 % 4,4% Average: euro area

Italy Malta Latvia Spain Poland Greece Cyprus Croatia Ireland SlovakiaIslandia France Austria Holland Finland Estonia Portugal Bulgaria Romania Denmark Hungary SloveniaBelgium Sweden eurozone Lithuania GermanyNoruega Luxembourg Czech Republic United Kingdom

Source: EBA (European Banking Authority), Eurostat, media information and Real Estate platforms.

Axis Corporate 2019 23 Current Situation in Spain Heatmaps

Average housing price by Autonomous Community (AC) Rental price by Autonomous Community 2018 per 2018 per square meter square meter 11.6€ 1,993€ (3.5%) (-0.6%) 7.5€ 1,226€ 1,142€ (7.1%) (-2.0%) (2.2%) 1,185€ 6.7€ (5.5%) 5.7€ (4.6%) 1,078€ 7.4€ (3.6%) (1.2%) (1.3%) 926€ 6.1€ 5.2€ 1,007€ (4.5%) 1,864€ (5.1%) (0.0%) 14.8€ (4.7%) 1,071€ (5,3%) (2.7%) (5.2%) 7.1€ (7.5%) 14.8€ 2.265€ (2.7%) (8.8%)

754€ 4.2€ 4.8€ 7.1€ 787€ 1.037€ (2.1%) (-1.5%) 2,146€ (2.4%) (4.4%) (4.7%) (4.9%) 14.0€ (6.0%) (12.0%)

960€ 5.9€ 1,210€ (4.8%) 7.6€ (3.5%) (4.7%) (2.7%)

1,299€ 9.5€ (4.8%) (4.4%)

Average home purchase price, September 2018 Average home rental price, September 2018 (% change year-on-year) (% change year-on-year) Average price Spain: 1,291€/m2 (3.7%) Average Price Spain: 8€/m2 (4.1%)

Average purchase prices €/m2 Average rental prices €/m2 1,886 - 2,265 € 1,509 - 1,885 € 12-15 € 9-12 € 1,132 - 1,508 € 754 - 1,131 € 6-9 € 4-6 €

As mentioned in previous editions of this report, housing and rental As in previous years, the Community of Madrid still leads in both prices are on the rise across Spain, although there are glaring price per square metre and price change year-on-year, up 8.8% contrasts. While inflation remains particularly high in autonomous in 2018. At the same time, the autonomous communities with the communities like Madrid, the Balearic Islands and Catalonia, there most expensive housing and fastest rising prices are those with the are other regions like Galicia with a growth rate close to 1% and in highest housing stock. This level of supply would be expected to act some, such as Asturias and Extremadura, prices are falling. as a brake on constantly rising prices.

Sources: The Spanish Ministry of Development, INE (Spanish National Statistics Institute), www.datosmacro.com, www.idealista.com and Tinsa (Real Estate valuations).

24 Assets Under Management REPORT Unemployment rate by autonomous community 2018 Housing Stock by autonomous commnunity 2018

12.5% (4.3%) 1,052,012 10.8% 364,468 (0.3%) (4.1%) (0.1%) 15.0% 624,001 15.1% (4.6%) (0.2%) 1,623,679 319,331 (4.9%) 10.5% (4.2) (0.1%) (0.3%) 202,403 (0.2%) 13,9% 12.2% 1,747,011 3,915,370 (3,0%) 11.6% (5.3%) (0.1%) (0.2%) (3.9%) 795,925 (0.2%) 2,974,747 13.4% (0.4%) (4.3%)

597,501 17.1% 20.7% (0.3%) 25.9% (3.5%) 17.4% 662,378 1,270,032 (5.3%) (4.5%) (5.0%) (0.1%) (0.1%) 3,182,158 18.6% (0.1%) (6.4%) 4,422,047 24.7% (0.2%) 786,733 (4.5%) (0.08%)

20.6% 1,049,945 (3.7%) (0.2%)

Unemployment rate, September 2018 Housing stock, December 2017 (% change year-on-year) (% change year-on-year) Unemployment rate Spain: 16.8% (4.1%) Average housing stock Spain: 1,505,279 (0.2%)

Unemployment rate Housing stock >26% - 32% >21% - 26% 3,368M - 4,422M 2,313M - 3,367M >15% - 21% 10% - 15% 1,258M - 2,312M 202M - 1,257M

Meanwhile, in the rental sector, until supply and demand even out, 2014. This is having a drastic impact on the supply of long-term a niche market is exploiting this situation: holiday rentals. In big rentals and driving prices up to the levels mentioned previously. cities such as Madrid and Barcelona approximately one in every In the medium term, the authorities are likely to step in to regulate ten flats is available for rent on platforms like Airbnb or Minty this situation. Until then, however, rental prices will continue to Host, driving rental prices in the city centre up by 38% since increase.

Sources: The Spanish Ministry of Development, INE (Spanish National Statistics Institute), www.datosmacro.com, www.idealista.com and Tinsa (Real Estate valuations).

Axis Corporate 2019 25 Current Situation in Spain Zoom average housing price indicator by autonomous community/Province

Average home purchase price, September 2018 (% change compared to December 2017). 1,597€ (0.4%)

1,928€ 2,291€ (-1.0%) (1.1%) 1,185€ 1,161€ (5.5%) 1,226€ (4.8%) 788€ (-2.0%) (2.2%) 1,142€ 863€ (2.2%) (6.3%) 1,104€ N /A (-3.9%) 837€ 981€ 926€ 956€ 1,416€ (-4.2%) (1.4%) (10.6%) (-5.2%) 918€ (3.8%) (8.9%) 873€ 2,117€ (-0.5%) 1,108€ N /A 1.133€ (5.5%) (8.0%) (7.3%)

995€ 1,173€ (5.1%) (4.0%) 1,141€ 958€ (-1.8%) (2.6%) 720€ 803€ (-0.3%) (1.1%) 2,265€ (8.8%) 846€ (-0.2%) 735€ 713€ 702€ N /A (-0.1%) (1.4%) (-3.7%)

999€ (6.3%) 723€ 861€ (4.8%) 775€ (1.9%) (-1.8%) 1,178€ (5.2%)

956€ 804€ 960€ (1.0%) (1.9%) (4.8%) 1,112€ (-0.2%) 1,280€1.280€ (4.4%)(4,4%) 1,026€ 992€ (1.7%) (5.4%) 1,554€ (5.1%) 1.311€1,311€ (4,3%)(4.3%)

N /A

Average purchase prices €/m2

1,718 - 2,291€ 1,146 - 1,717€

573 - 1,145€

Source: Tinsa (Real Estate valuations and platforms).

26 Assets Under Management REPORT Ranking of the average purchase price by Ranking of the average purchase price by Province, autonomous community, Q2 2018 per square meter Q2 2018 per square meter

Madrid 2,265€ Gipuzkoa 2,291€

Balearic Islands 2,146€ Madrid 2,265€

Basque Country 1,993€ Barcelona 2,117€

Catalonia 1,864€ Biscay 1,928€ 1.353€ Canary Islands 1,299€ Álava 1,597€

Cantabria 1,226€ Malaga 1,554€

Andalusia 1,210€ Girona 1,416€

Asturias 1,185€ Cádiz 1,311€

Navarre 1,142€ Seville 1,280€

Galicia 1,078€ Cantabria 1,226€

The scatter plot of GDP by autonomous community year-on- Meanwhile, comparing GDP growth by autonomous community year reveals that they have all shifted to the right. If this graph is with rental and housing prices shows that in most cases there is a compared with that for unemployment, it can be seen that there is direct relationship between the autonomous communities with the direct relationship between the two autonomous communities with least growth and those that have lower prices. the highest unemployment rate and the two with the lowest growth rate; the rest of the communities don’t follow any specific pattern.

Source: Tinsa (Real Estate valuations and platforms).

Axis Corporate 2019 27 Current Situation in Spain Indicators with the highest distribution inequality

2017 GDP by autonomous community

GDP (€m) 223,139 250,000 219,976 Catalonia Madrid

200,000 155,213 Andalusia

150,000 108,781 Community of Valencia 60,824 Galicia 71,743 100,000 Basque Average 57,094 40,046 C.la Mancha 36,054 Castile and León Aragon 1,523 19,827 44,206 Navarre Canary 50,000 Melilla 22,708 Islands Asturias 18,520 1,660 8,137 Extremadura Ceuta La Rioja 29,911 Balearic Islands 0

0.0% 1.0% 2.0% 3.0% 4.0% 13,083 5.0% 6.0% GDP change (%) 30,344 Cantabria Murcia

Unemployment rate by autonomous community Q3 2018

Unemployment rate 30.8% 30% Ceuta

22.9 % 25% Andalusia % % 24.0 21.7 19.7 % Melilla Extremadura Canary Islands 16.7 % C. la Mancha 20% 16.3% % 15.3 Murcia % C.Valenciana 13.5 Asturias Average 12.2% Galicia 15% 11.3% 11.9 % C.and León Madrid % 9.0 % % Cantabria 9.9 9.6% 9.7 Aragon La Rioja Navarre 10% 10.6% Catalonia 9.4% Basque Country 7.2 % Balearic Islands 0 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% GDP change (%)

Source: Tinsa (Real Estate valuations and platforms).

28 Assets Under Management REPORT Average home purchase price by autonomous community (€/m2) in 2017

Average home purchase price (€/m2)

2,500 2,082 2,023 Madrid Balearic Islands 2,005 1,770 2,000 Basque Catalonia Country 1,239 Canary 1,251 Islands Cantabria 1,500 1,155 1,123 Average 961 1,117 Andalusia Asturias C.and León Navarre 1,065 1,000 766 989 Galicia Extremadura Community 1,018 886 of Valencia 916 La Rioja Murcia Aragon

500 751 C. La Mancha

0 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% GDP change (%)

Average home rental price by autonomous community (€/m2) in 2017

Average home rental price (€/m2)

14 14.4 14.4 Madrid Catalonia

12 12.5 Balearic Islands

11.2 9.1 Basque Country Canary Islands 10 7.4 Andalusia 7.3 Average Navarre 8 6.9 Community of 6.6 Valencia Aragon 5.8 C.and León 5.7 7 Murcia Cantabria 6 6.4 5.5 Asturias Galicia 4.1 5.2 Extremadura La Rioja 4.7 C.La Mancha 4 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% GDP change (%)

Source: Tinsa (Real Estate valuations and platforms).

Axis Corporate 2019 29 30 Assets Under Management REPORT 3 Asset Holders

The crisis and regulatory requirements have stimulated non-productive asset divestment, a trend that will continue in the short term. Axis Corporate 2019 31 Asset holders Financial institutions

The financial sector has recovered Positioning of major financial institutions from the low cost effectiveness Asset valuation (€m) and liquidity problems that had Diameter: been holding it back since the 2008 400,000 Collateral % crisis. The crisis caused a major shift in the banking market, bringing 350,000 Banco Santander BBVA CaixaBank % with it challenges that banks must 51% 48 77% 300,000 continue to grapple with, such as divesting impaired assets and Bankia 250,000 adapting to the new regulatory % 64 framework. 200,000 Banco Sabadell One of the consequences of 150,000 69% this shift was the creation of a market that is significantly more 100,000 Bankinter concentrated among the major 57% players, which was also spurred on 50,000 by the digital revolution. The number of national institutions 0 0% 2% 4% 6% 8% 10% 12% dropped from 122 in 2008 to 65

NPL ratio in 2017. The 5 largest banks now account for 70% of total banking assets in Spain.

Toxic assets declined in 2018, continuing the downward trend seen over the past few years. Total toxic assets in June 2017 Portfolio sales by major financial institutions (€m) were valued at 138 billion euros (10% lower than in 2016) and at Assets sales (revenue in €m) 150.46 billion euros in June 2018. 34,185 31,000 Consequently, the combined NPL ratio for all institutions fell by 4.36%.

20,578

15,490 13,681 2,792 2,090 12,610 1,355 5,100 1,100 2,000 9,700 900 1,300 6,100 250 1,050 6,317 2,780 0 550 5,630 0 4,810 2,400 2,380 500 2,947 3,600 1,600 150 1,350 2,775 240 934 2,500 0 100 0 0 2015 2016 2017 2018 For sale Stock Bankia Unicaja BBVA CaixaBank Banco Sabadell Banco Santander SAREB Ibercaja Liberbank Sources: Banco de España 2017 Annual Report, Financial Stability Report Nov. 2017, and public sources. Figures at end 2018.

32 Assets Under Management REPORT 2018 was a record year for the sale

of toxic assets. Sales in the first Portfolio sales by financial institutions in Spain (€m) part of the year alone equalled 45 those in the previous year. Including 3,750 financial institutions' portfolios for sale, the value of asset sales in €m 72,646 60.000 2018 was double that of 2016. This 31 56,721 was heavily influenced by major 50.000 operations such as the Sareb sale,

which put assets worth 25 40.000 billion euros on the market, and

CaixaBank's sale of assets worth 30.000 35 10 billion euros to LoneStar in 2017. 35 21,656 29 31 20.000 16,147 18,291 20 13,313 However, outstanding stock levels 16 5 8,556 mean alternative solutions needs to 10.000 2 4 7,820 2,600 be found to help institutions clean 520 630 0 up their balance sheets faster, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 such as the creation of a transaction platform for non-performing loans Source: Deloitte Deleveraging Europe 2017 - 2018 report and public sources. Sold or opening operations in foreign Figures at end 2018. No. Transactions For Sale markets. (According to our own sources, stock is estimated at 68.46 billion euros)

Investment funds

Major portfolio transactions Most active funds in the past year Buyer Seller Portfolio Volume (€m) (%) (€m)

Blackstone Santander Popular 30,000 51 15,800 Cerberus BBVA Marina 13,000 80 10,400 Lone Star CaixaBank - 12,800 80 10,240 17,680 Cerberus Sabadell Challenger y Coliseum 9,100 80 7,280 Cerberus Deutsche Bank Sabadell Makalu (CAM*) 2,500 - - CPPIB BBVA Sintra 1,000 100 1,000 Axactor Sabadell Galerna 900 100 900 D.E. Shaw CaixaBank Tribeca 700 100 700 15,800 Deutsche Bank CaixaBank Tramuntana 700 100 700 The Blackstone Lindorff Santander Wembley 500 100 500 Group Deutsche Bank Sareb Inés 400 100 400 LCM Partner Cajamar Galeón 300 100 300 Golden Tree Bankia Giants 300 100 300 12,800 Grove Santander Capri 300 100 300 Lone Star Oaktree Sareb Tambo 150 100 150 Funds Total volume 72.65 billion euros

Source: public sources.

2019 Axis Corporate 33 Banking divestment between 2015 and 2018

This graph shows four years (2015-2018) of bank asset divestment movements amounting to 147.35 billion euros. According to public sources, at the date this report was prepared, stock was estimated at 68.46 billion euros, 6% of which was already included in portfolios for sale as of January 2019.

Asset seller ranking Asset buyer ranking Value of assets Value of assets in stock (€m) sold (€m) Seller Buyer Value of assets bought (€m)

12,100 36,710 82% 42,124 51%

32,140 ND 29,171 88%

63% 20,070 28% 2,500 27,048 10% 6,224

7,667 18,302 13% 3,897

ND 11,030 11% 3,700 10%

11% 3,010 3,600 5,280 11%

46% 2,800 34,185 5,092 11% 2,490* ND 1,683 2,200 61%

ND 1,448 25% 1,883 82%

35% 2,275 1,434 23% 1,264

66% 42% 1,100 ** 0 1,220 48%

34% 1,063 ND 1,048 721

ND 721 100% 560*

ND 700 480* 100%

431* ND 600 100% 362

ND 500 100% 29% 308

56% ND 450 18% 300

Includes the following ** 100% 44% 200 0 446 buyers: Intrum, Grove, Testa Residencial, Deutsche Bank, 38% 24% 17% 180 Cabo, Aiqon Capital, Sankaty, ** 0 422 Waterfall, Davidson Kempner, 38% 160 Farallon, BAML, Waterfall Asset Management, GoldenTree, Bain ND 180 100% Capital Credit, and KKR. 50*

3,869 OTHERS OTHERS 19,637

Source: prepared by the authors based on public sources. * Buyers whose acquired portfolio accounts for less than 10% of the total sale. * Institutions that are currently owned by other financial institutions that made divestment transactions.

34 Assets Under Management REPORT Investment Funds

Portfolio purchases in Spain Portfolio purchases in Spain (€tn) Ranking by portfolio acquisition in Spain (€tn)

Top buyers 2017 Top sellers 2017 €tn 45 46.6 €tn €tn 30.5 40 30 30 30

35 Change 2016-2017 22% 25 25 30 547. 20 20 25 15 13 15 13.2 20 10 10 15

10 5 5 1.3 2 7.2 1.2 1.1 1.3 1.1 5 0 0 2016 2017

BBVA Bankia Lindorff Cerberus Deutsche Blackstone CaixaBank Bain Capital Bank

Banco Sabadell Banco Santander

Portfolio purchases in Europe Portfolio purchases in Europe (€tn) Ranking by portfolio acquisition in Europe (€tn)

Top buyers 2017 Top sellers 2017 €tn Change 2016-2017 80 €tn €tn % 70 17.5 75.5 50 50

60 43.8 64.4 40 40 50 30.5 40 30 30 27 30 20 20 14.3 17.5 20 13.2 10 10 7.4 10 3.2 2.9 2.2 0 0 2016 2017

Fund UKAR BBVA

di Siena Unicredit Cerberus Blackstone Italyn Recovery Banca IFIS Bain Capital Monte Paschi

Banco Santander

Source: Deloitte Deleveraging Europe 2017 - 2018 report.

Axis Corporate 2019 35 Asset holders

Portfolio purchases in Europe by major investment funds

Ranking by portfolio acquisition in Europe (€tn)

Cerberus 32.4 9.1 14.3

Blackstone 3.1 0.4 43.8

Fortress 2.4 13.5 0.2

Lone Star 5.0 6.0

Goldman Sachs 5.8 2.5 2.3 0.8 Deutsche Bank 8 1.1

Oaktree 3 6.2 0.5

Banca IFIS 2.7 2.4 2.9

Italyn Recovery Fund 7.4

Bain Capital 2.4 3.2

€ trillions 2015 2016 2017

Ranking by portfolio purchase in Europe (€tn)

UKAR 17.9 17.5

Banco Santander 0.9 30.5

UniCredit 6.2 20.7 2.2

Monte Paschi di Siena 1.3 0.3 27

NAMA 11.3 10.2

BBVA 13.2

GE capital 12.9

RBS 7.2 3.2 0.5

Bank of America 8.6

Pelmanent TSB 5.5 3.1

€ trillions 2015 2016 2017

Source: Deloitte Deleveraging Europe 2017 - 2018 report.

36 Assets Under Management REPORT Axis Corporate 2019 37 4 Servicers

Significant pressure to reduce margins will force them to redefine their model in an environment with a reduced number of players. There is a need for specialisation and/or expanding to new business areas. 38 Assets Under Management REPORT Servicers Market introduction

Assets under management (€m)

2015 2016 2017 2018 + + + +

59,000 53,839 54,600 48,000

43,946 45,000

39,482 40,159 38,225 34,000 33,845 30,000 33,288 30,000 31,000 29,367 31,470 25,108* 25,108* 23,000

27,233 15,300 13,000

13,000 12,000

10,000 10,000 10,000

10,000

a a a a

1,000 1,000 1,000 1,000

- - - -

Source: Axis Corporate’s own data based on public sources and data obtained directly from Servicers. Data drawn from available information in 2018 (Q3).

Axis Corporate 2019 39 Servicers Market share

Source: Axis Corporate’s own data based on public sources and data obtained directly from the Servicers. Data drawn from available information in 2018 (Q3). *Data drawn from available information in 2017. **Awaiting closing data from Intrum at the date on which this report was prepared. ***The contract with Cerberus is expected to come in force when the Challenger and Coliseum transaction is closed.

40 Assets Under Management REPORT Positioning by turnover

Positioning by turnover

Sales in €m Diameter: unit selling price

2,500

2,000 Solvia 76,961 Anticipa Servihabitat 1,500 96,294 100,002

Haya 53,866 1,000 Altamira 93,760 Aliseda 500 94,289

0 4,000 9,000 14,000 19,000 24,000

Unit sold

Ranking of Servicers by unit selling price

Servihabitat €100,002

Anticipa €96,294

Aliseda €94,289

Altamira €93,760 €85,862 Mean unit selling price Solvia €76,961

Haya €53,866

0 20,000 40,000 60,000 80,000 100,000 Unit selling price

Source: Axis Corporate’s own data based on public sources and data obtained directly from the Servicers. Data drawn from available information in 2018 (Q3).

Axis Corporate 2019 41 Servicers Positioning by turnover

Profit margin

Revenue (€m) Diameter EBITDA over revenue 500

400 Altamira Servihabitat 42% 300 Haya 35% 53% Solvia 200 28% Anticipa 100 22%

0 0 50 100 150 200 EBITDA (€m )

Top Servicer ratios

EBITDA (€M)/ EBITDA (€M)/ REVENUE (€M)/ EBITDA (€M)/ ROA REVENUE (€M) EMPLOYEES EMPLOYEES ASSETS

1Aliseda 1.55 2.58 1.67 0.05 0.04

Haya 0.53 0.17 0.32 3.86 7.69*

Servihabitat 0.35 0.13 0.36 2.54 19.41*

Solvia 0.36 0.10 0.28 2.05 27.79

Altamira 0.42 0.08 0.20 1.66 9.98

Anticipa 0.22 0.03 0.13 0.002 0.001

Positioning by turnover 2017 vs 2018

REVENUE EMPLOYEES EARNINGS 2018

2017 2018 % Chg 2017 2017 2018 2018 Total Assets EBITDA EBIT Earnings (€m) (€m) 17vs18 Number Permanent Number Permanent (€m) (€m) (€m) (€m) (%) (%) 1Aliseda 181 788 335% 405 99% 473 97% 25,997 1,221 1,170 1.055

Haya 257 277 8% 809 87% 945 90% 38,225 148 43.4 15.1

Servihabitat 301 227 -25% 561 91% 623 ND 31,470 80 N /A N /A

Solvia 163 N /A N /A 734 95% N /A N /A N /A N /A N /A N /A

Altamira 291 380 31% 564 100% 624 100% 54,131 160 65 33.7

Anticipa 50 65 31% 395 96% 497 97% 6,153 14 10 9

Source: Axis Corporate own data based on public sources and data obtained directly from the Servicers. Data obtained for available information from 2018 (Q3). *Data obtained for available information from 2017. (1)Aliseda figures reflect an adjustment for extraordinary income.

42 Assets Under Management REPORT Online positioning of Servicers and asset holders, October 2018

% Bounce rate** Diameter: browsing time (min)

60 Aliseda 50 Haya Alquilovers 4:11 5:53 40 4:27 Altamira 30 4:21 Servihabitat Solvia 6:01 20 Divarian 2:41 6:51 10

0 Ranking of 14,020 12,020 10,020 8,020 6,020 4,020 2,020 20 websites in Spain

Ranking created by combining the number of daily visits and the number of pages seen per visit in the past month (October 2018). *Data obtained for available information from 2017. Source: www.alexa.com.

2018 Business and website positioning

Sales (€m) Diameter: unit selling price

2,500

Solvia 2,000 76,961 Servihabitat Anticipa 1,500 100,002 96,294 Haya

1,000 Altamira Aliseda 53,866 93,760 94,289

500

0 Ranking: 4.520 4.020 3.520 3.020 2.520 2.020 1.520 1.020 520 20 website positioning in Spain

Axis Corporate 2019 43

5 REITs

REITs continue to stand out as important investment vehicles playing a stimulating role in the sector. More are expected to be created or consolidated in 2019. REITs REITs Map

It only covers the list of shareholders with a stake equal to or greater than 5% in the capital of the Company (it doesn't include minority shareholders or investors of the management group with a stake> 1%).

As mentioned in the previous REITs by asset value Shareholders edition, 2018 was characterised by a proliferation of REITs, with 17 new REITs participating in the Mercado + FREE FLOAT 22% Alternativo Bursátil and two new REITs trading on the Euronext,

€12.0 tn 58% totalling 64 listed companies. REITs 20% have been playing an important

16% role in stimulating the industry and are expected to consolidate their €11.3 tn 6% ÁGUILA LTD. position in 2019. 23%

81% €2.6 tn Some REITs maintained 91% similar asset values year-on-year (Merlin, Colonial, Hispania and 33% OTHER €2.5 tn SHAREHOLDERS Testa) while others such as Atom 67% Hoteles, Castellana Properties and TOMÁS OLIVO LÓPEZ Meridia Real Estate climbed in the €2.2 tn 100% ranking in 2018. While it is ZILOTI HOLDING SA true that the number of REITs with a net asset value above 0.2 trillion €2.0 tn 85% OTHER SHAREHOLDERS euros remains stable, their share prices rose throughout 2018. 46% €1.9 tn 20% It seems 2019 will be the year they

10% secure their market position largely due to a welcoming environment for €1.5 tn 8% REITs: bank disintermediation 5% and regulatory principles such as €1.1 tn 5% sandboxes that make operations 4% more secure (despite the proposed

3% corporation tax increase) or €0.9 tn generate greater interest among 97% foreign investors. Moreover, according to data on demand, €0.7 tn consumption is forecast to rise 97% ALTAYA PTE. LTD in 2019, which may lead to more activity and higher returns. €0.5 tn 98%

PYLADES INVESTMENT 99% HOLDING B. V €0.5 tn ALCMENA (REIT) HOLDCO

97%

INTU ZARAGOZA - HOLDING

Source: data obtained from public sources.

46 Assets Under Management REPORT REITs Map

This year, most investment REITs by asset value Shareholders has been directed towards the tertiary sector, although residential investment remains important, + 7% especially for small investors who 5% see REITs as a useful vehicle and 5% an interesting alternative at a time TERRENOS Y €0.5 tn 5% EDIFICACIONES DOSRIUS SL of low interest rates. Portfolio 4% GLOBAL MYNER ADVISORS CAPITAL specialisation was a key feature INVESTMENT SL of REITs in previous periods, but BRANCH €0.4 tn 99% MANAGEMENT now they are shifting their focus to diversifying products within 99% that specialisation (offices, logistic centres, hotels, health centres, etc.) €0.3 tn SPANISH RESIDENTIAL and to diversifying geographically. 98% (REIT) HOLDCO S.À.R.L

ALUMBRE INVERSIONES 2014 Looking a few years down the 99% CORPORACIÓN EMPRESARIAL HOLFIN SA road, investments are expected €0.3 tn to be more closely linked FALAGAL INMUEBLES SL to building experiences (for 13% DOGALCAR instance, connected buildings 11% PATRIMONIO SL

6% that use artificial intelligence) or €0.3 tn SANTI 1990 SL 5% constructions whose functionality

5% SURISTER DEL is closely related to booming ARROYO SL 5% economic sectors, such as e-commerce, where warehousing €0.3 tn 5% 4% will be a key factor for meeting FUNDACIÓN EDUCACIÓN Y COOPERACIÓN demand.

P3 SPAIN II 93% €0.2 tn EMPIRE (SOCIMI) HOLDCO

98% GRUPO DREOF

€0.2 tn 18% PERIZA INDUSTRIES 16%

13% GRUPO HAREL

12%

€0.2 tn 8% CREDIT SUISSE ANLAGESTIFTUNG 2 7% ANANGU GROUP 5%

5% INMO €0.2 tn BCN 2001

99% PHYSICAL SHAREHOLDERS -

Source: data obtained from public sources.

Axis Corporate 2019 47 REIT portfolio mix

Net asset value over €200 m

100% +

50% Residential

0% 50% + Tertiary 100%

Residential 15% zoom + +6 Provinces 3 Provinces By region

1 Province + 1 product 3+ products 6+ products By product

+ 14+ Provinces

Tertiary zoom 7+ Provinces 7+ By region 1 Province 1 product 3+ products 6+ products + Por producto

Source: data obtained from public sources.

48 Assets Under Management REPORT Axis Corporate 2019 49 *

Appendices

50 Assets Under Management REPORT Appendices Appendix I - Major banking institutions

Greece

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

PERIOD Previous Last Previous Last Previous Last Previous Last Previous Last Previous Last Previous Last Previous Last period period period period period period period period period period period period period period period period

Piraeus 24,400 20,721 37% 34% N /A 2.302 N /A 2,454 N /A 68% ND 72% 1,170 2,227 70% 75% Bank

Alpha 22,900 16,400 35% 35% 19,063 18,836 23,891 23,782 36% 35% 45% 44% 441 542 122% 128% Bank*

Euro- bank* 17,600 15,800 35% 33% 17,835 16,657 N /A N /A 35% 35% N /A N /A N /A 11,150 63% 64%

National Bank of 12,600 15,300 34% 43% 16,388 17,922 30,585 N /A 40% 34% 75% N /A 10,968 12,034 56% 75% Greece

Cyprus

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

Previous Last Previous Last Previous Last Previous Last Previous Last Previous Last Previous Last Previous Last PERIOD period period period period period period period period period period period period period period period period

Bank of Cyprus 8,309 6,905 41% 37% 94 N /A 2,854 3,138 1% N /A 16% 17% 4,519 4,204 54% 61% Public Company

Coope- rative 7,217 6,716 60% 59% 2,455 N /A 23,782 N /A 20% N /A 44% 46% N /A N /A 45% 47% Central Bank

Hellenic Bank 2,504 2,100 58% 43% 619 590 1,428 1,101 14% 15% 33% 27% 1,374 1,288 55% 65% Public Company

RCB 60 75 1% 0% 16 16 7,131 6,823 0% 0% 100% 93% N /A N /A 111% 132% Bank Ltd

Previous period refers to 2016 except for those institutions marked with (*), in which case it refers to 2017. Last period refers to 2017 except for those institutions marked with (*), in which case it refers to 2018.

Source: information obtained from the annual reports of the listed financial institutions.

Axis Corporate 2019 51 Portugal

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

Banco Comercial 5,385 4,323 6% 10% 28,112 23,365 35,478 43,176 53% 46% 67% 85% 321 301 107% 113% Português

Banco Português 1,219 1,146 5% 5% 11,084 11,127 N /A N /A 50% 49% N /A N /A N /A 64 50% 55% Investi- mento*

Caixa Geral de 10,860 8,145 16% 12% 27,064 29,755 N /A 32,283 39% 46% N /A 50% 1,127 1,288 52% 57% Depositos

Novo 11,288 9,594 33% 31% 13,635 9,511 16,838 10,841 42% 28% 34% 32% 5,566 5,631 49% 59% Banco

Monte- 1,372 581 9% 8% 7,613 6,599 N /A N /A 51% 51% N /A N /A 22 27 86% 90% pio

Croatia

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

Zagre- backa 1,692 1,306 14% 11% 1,408 1,550 N /A 3,824 2% 2% 5% 5% 78 98 64% 62% banka

Privredna 10,284 1,265 14% 13% 2,613 2,747 4.727 4,637 30% 31% 54% 53% 49 47 72% 74% banka Zagreb

OTP Bank 792 556 10% 6% N /A N /A N /A N /A N /A N /A N /A N /A N /A N /A 83% 89%

Erste & Steiermär- 719 787 11% 12% 1,708 1,776 3,062 2,993 18% 18% 32% 31% 35 36 115% 104% kische Bank

Raiffeisen- bank 440 345 16% 13% N /A N /A N /A N /A N /A N /A N /A N /A N /A N /A 84% 79% Austria

Addiko 761 606 9% 8% N /A N /A N /A N /A N /A N /A N /A N /A 108 83 68% 67%

Source: information obtained from the annual reports of the listed financial institutions.

52 Assets Under Management REPORT Ireland

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

Bank of 9,430 6,521 11% 8% N /A N /A N /A N /A N /A N /A N /A N /A 96 205 41% 36% Ireland

Allied 14,100 10,200 23% 17% N /A N /A N /A N /A N /A N /A N /A N /A N /A N /A 44% 43% Irish Bank

Permanent 5,850 5,282 27% 26% N /A N /A N /A N /A N /A N /A N /A N /A 84 63 42% 42% TSB

EBS Building 1,948 1,532 7% 13% 11,668 11,841 11,841 11,979 94% 97% 95% 98% N /A N /A 43% 42% Society

Italy

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

Banca Nazionale 31,200 39,902 4% 5% 66,827 76,631 193,795 168,570 9% 10% 26% 22% 11,801 11,061 89% 91% del Lavoro

Intensa 29,767 25,464 8% 6% 145,342 171,341 N /A N /A 40% 42% N /A N /A N /A N /A 61% 63% Sanpaolo

Unicredit 56,342 48,432 12% 10% 149,827 153,425 N /A N /A 31% 32% N /A N /A 10,541 8,650 56% 56%

Banco 10,200 13,505 12% 17% 39,128 38,662 N /A N /A 50% 49% N /A N /A 90 105 32% 33% Popolare

Banca Monte dei 20,300 10,352 19% 12% 49,533 46,868 N /A N /A 46% 54% N /A N /A 1,006 1,338 56% 67% Paschi di Siena

Banca Popolare 11,407 10,533 22% 20% 26,488 30,527 31,155 N /A 58% 64% 68% N /A 628,155 627,921 45% 49% dell'Emilia Romagna

Banca Popolare 12,568 13,032 17% 12% 38,129 62,664 N /A N /A 50% 58% N /A N /A 1.133 1.461 48% 50% di Milano

Source: information obtained from the annual reports of the listed financial institutions.

Axis Corporate 2019 53 Spain

DISTRESSED LOANS NPL RATIO MORTGAGE TOTAL MORTGAGE TOTAL COVERAGE GRANTED COLLATERAL COLLATERAL COLLATERAL COLLATERAL PROVISIONS RATIO

Santan- 34,636 37,408 4% 4% N /A N /A 434,384 474,458 N /A N /A 51% 55% 14,490 14,284 71% 70% der*

BBVA* 20,371 16,191 5% 4% 112,274 101,670 197,795 N /A 29% 28% 48% N /A 7,605 N /A 71% 73%

Caixa- 14,305 13,695 6% 6% 88,343 87,620 9,678 N /A 39% 39% 77% N /A 5,346 4,889 50% 55% Bank*

Banco 9,746 7,867 6% 7% 93,208 84,267 96,579 101,734 62% 57% 64% 69% 306 318 52% 48% Sabadell

Cajamar 4,211 3,695 13% 11% 17,178 19,700 22,485 19,851 58% 66% 76% 66% 307 93 42% 43%

Liber- 3,150 1,900 14% 9% 16,188 15,652 16,821 16,282 74% 73% 77% 76% 200 238 46% 50% bank

Abanca 2,153 1,541 7% 5% 11,574 11,167 16,379 16,760 41% 37% 58% 56% 539 410 54% 55%

Kutxa- 2,964 2,165 7% 5% 22,963 23,363 25,081 25,038 54% 56% 59% 60% 558 566 48% 42% bank

Bankinter 2,297 2,030 4% 4% N /A N /A 30,124 30,223 N /A N /A 59% 57% 154 206 49% 45%

Unicaja 3,215 2,710 10% 9% 16,745 15,900 N /A N /A 59% 56% N /A N /A 707 1,355 50% 50% Banco*

Bankia 10,717 9,740 10% 9% N /A N /A 67,023 78,527 N /A N /A 54% 64% 1,405 2,035 55% 51%

Ibercaja 3,061 2,565 9% 8% 21,004 20,398 23,309 22,631 64% 63% 68% 70% 411 373 45% 43%

54 Assets Under Management REPORT Appendix II - NPL ratios, unemployment rates and GDP in the 6 countries with the highest NPL ratio

Country NPL ratio (2005-2018)

% Greece 45.6% 47.0 14.4% 36.3% 6.3% 4.6% 7.0 % 31.9 % 2011 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

Cyprus % % 48.7 N/A N/A N/A % 10.0 4.5 38.6% 40.16% 38.9 % 2011 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

% Portugal 7.5 % % 17.2 4.8 % % % 10.6 13.3 12.8% 1.5% 2.8 2011 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

Italy % 11.7 % % 17.1 % % % 16.5 7.0 5.8 9.4 14.4% 9.9 % 2011 2017 2013 2015 2016 2014 2012 2018 2010 2007 2005 2009 2006 2008

Croatia 12.8% % % 15.4 % % 7.7 13.6 4.8 11.2% 11.3% 0.0% 2011 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

Ireland % 9.8% 25.7 % 13.7 16.1% % 0.5% 0.6 11.5% 10.6% 2011 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

Source: www.datosmacro.com and The World Bank.

Axis Corporate 2019 55 Unemployment rate (2005-2018) GDP (2005-2017)

% % 20.8 % % 10.7 % 9.7 8.1 % % 3.3 % 27.5 23.4 % % % % % 21.3 19.0 0.6 % 0.4 0.2 1.5 -4.3% -9.1% -3.2 2011 2017 2013 2015 2016 2014 2012 2010 2011 2007 2005 2017 2009 2006 2013 2008 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

% % % % % 4.9 5.1 4.8 % % 16.4 7.4 % 4.2 % 6.6 % 2.0 5.2 % % 0.4 3.7 12.8 % % 9.7 % 10.4 -2.0% -5.8 2011 2017 2013 2015 2016 2014 2012 2010 2007 2005 2009 2006 2008 2011 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

% % 11.3 8.9 8.7 % % % % % 6.6 % % 2.8 14.4 15.1 % 2.5 % 1.9 % % 0.8 % % 1.8 10.1 7.9 -3.0% -1.8 -1.1 2011 2017 2013 2011 2015 2016 2014 2012 2017 2010 2013 2015 2007 2016 2014 2018 2012 2005 2010 2009 2006 2008 2007 2005 2009 2006 2008

% % 9.6 11.7 % 8.4% 10.1 % % % % % 7.5 6.6 12.5 % 1.5 % % 1.6 10.9 % 0.9 0.6% 0.9 1.1 -5.5% -1.7 % 2011 2017 2013 2015 2016 2014 2012 2011 2010 2017 2007 2013 2015 2005 2016 2014 2018 2009 2006 2012 2008 2010 2007 2005 2009 2006 2008

17.6% % % 5.3% 13.0% 14.3 12.5 % % % 4.1 % 9.3 10.2 % % % 3.5 % 9.7 8.1 % 2.4 2.9 -7.3% -0.3 -0.5% 2011 2017 2013 2015 2016 2014 2012 2010 2011 2007 2017 2005 2013 2015 2009 2006 2016 2014 2008 2018 2012 2010 2007 2005 2009 2006 2008

25.1% % 15.9 % 5.0% % 7.5 % % % % % % 5.3 % 6.2 5.3 5.7 5.3 % 7.2 5.0 13.9 % % 8.8 12.9 -5.0% 3.7 2011 2017 2013 2015 2016 2014 2012 2010 2007 2005 2011 2009 2006 2008 2017 2013 2015 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

Source: www.datosmacro.com and The World Bank.

56 Assets Under Management REPORT Appendix III - Key economic indicators in Spain

Total GDP

1,116,319 1,118,522 1,080,935 1,079,998 1,080,807 1,079,052 1,070,449 1,116,225 1,039,815 1,007,974 1,025,693 1,037,820

930,566

900,448 * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2009 2006 2008 2005 2018

GDP per capita

25,100 23,900 23,300 24,100 24,300 23,200 23,200 22,700 22,900 22,780 22,562 22,518 21,300

19,298 * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2009 2006 2005 2008 2018

Rental price per m2

10.6 8.98 9.65 9.70 8.55 8.05 N/A N/A 7.57 8.20 7.28 6.80 6.70 7.10 * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2009 2008 2005 2006 2018

Interest rate 3% 3% 3% 3% . . . . 4 4 4 4 8% . 3 3% . 3 6% . 2 0% 8% . . 2 5% 5% 5% 0 . . . 3% 1 1 3% 3% 0 . 3% . . . 1 2% 1 0% 0% 0% 1% 0 0% 1 . 0% 0% 0% 0% 0% ...... 1 1 1 0 1 0 0 0 0 0 0 2011 2017 2013 2016 2014 2018 2012 2010 2007 2005 2009 2006 2008

*Figures for 2018 up to Q3. **Forecast figures for 2018 Source: Banco de España, The Spanish Ministry of Development, Worldbank, www.datosmacro.com, www.fotocasa.com and www.oficemen.com.

Axis Corporate 2019 57 Unemployment rate

% 21 % % 26% 19 % % 26 % 17 % 15 % 24 15 19% 20% 23 % 9% 9 8% * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2005 2009 2006 2008 2018

Average housing price

2,892 2,862 2,150 2,350 2,350 2,000 2,613 1,891 2,685 2,352 2,262 1,730 2,112 1,632 * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2009 2006 2008 2005 2018

Cement consumption in Spain

55,896,387 55,997,071 50,529,535 42,695,536 20,441,108 13,700,000 28,913,148 12,300,000 24,456,014 13,596,586 10,742,972 10,830,639 10,790,639 11,140,639 * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2009 2006 2008 2005 2018

New construction permits as a % of total

% 62.2 % % 60.0% 56.9 % 32.8 47.0 % % % 35.5 % % % % 29.0 31.1 33.1 31.8 30.1 % 26.6 26.4% 27.9 * 2011 2017 2013 2015 2016 2014 2012 2010 2007 2009 2006 2008 2005 2018

NPL ratio** 9.38% 7.48% 8.45% 6% 6.16% % % % % % 4.66 5.64 4.46 4.36 2.80% 4.12 0.70% 0.89% 0.79% 2011 2017 2013 2015 2018 2016 2014 2012 2010 2007 2005 2009 2006 2008

*Figures for 2018 up to Q3. **Forecast figures for 2018. Source: Banco de España, The Spanish Ministry of Development, Worldbank, www.datosmacro.com, www.fotocasa.com and www.oficemen.com.

58 Assets Under Management REPORT Banking divestment between 2015 and 2018

Total Sales Total Sales Seller Assets Stock (€m) Buyer Seller Assets Stock (€m) Buyer

Santander 48,810 12,100 36,710 Blackstone (82%) Liberbank 8,880 3,600 5,280 Others (85%) Cerberus (9%) Bain Capital (11%) Cabot (2%) GoldenTree (3%) Axactor (1%) Otros (2%) Sareb 39,277 34,185 5,092 Axactor (46%) Intrum (1%) Deutsche Bank (11%) Lindorff (1%) Goldman Sachs (11%) Grove (1%) Blackstone (5%) Others (1%) Bain Capital Credit (3%) Oaktree (3%) BBVA 29,171 N /A 29,171 Cerberus (88%) Others (21%) CPPIB (8%) Metrovacesa (1%) Abanca 1,683 N /A 1,683 EOS Spain (82%) Blackstone (1%) KKR (18%) Oaktree (1%) Grupo Puig (0%) Bankinter 1,448 N /A 1,448 Axactor (61%) Arrow Global Limited (25%) Caixabank 29,548 2.500 27,048 Lone Star (63%) Others (14%) DE Shaw (10%) Goldman Sachs (6%) Ibercaja 4,209 2,775 1,434 Intrum (42%) Deutsche Bank (5%) Bain Capital (35%) Otros (9%) Cabot (23%) Blackstone (3%) Cerberus (2%) Banco Popular₁ 1,220 0 1,220 Blackstone (66%) Apollo (2%) Apollo (34%) Testa Residencial (1%) Cajamar 1,048 N /A 1,048 Bain Capital (48%) Sabadell 25,969 7,667 18,302 Cerberus (51%) Link Financial Group (29%) Others (14%) Carval (17%) Deutsche Bank and CarVal Lindorff (6%) (13%) Cabot-Grove-Lindorﬀ (5%) Evo Banco 721 N /A 721 Elliott (100%) Oaktree (5%) Axactor (5%) Kutxabank 700 N /A 700 Bain Capital Credit (100%) Aiqon Capital (4%) Bain Capital (5%) FMS 600 N /A 600 Oaktree (100%)

Bankia 16,660 5,630 11,030 Lone Star Deutsche Bank 500 N /A 500 Oaktree (100%) Others Oaktree Unicaja 450 N /A 450 Axactor (56%) Deutsche Bank Neinor (44%) Bain Capital Sankaty Banco CEISS₁ 446 0 446 Axactor (100%) EOS Spain Waterfall BMN₁ 422 0 422 Axactor (38%) Davidson Kempner and Ellington Management (38%) Farallon Apollo (24%) BAML Ellington Management-Water- Caja Rural del Sur 180 N /A 180 Axactor (100%) fall Asset Management GoldenTree Otros 3,869 DE Shaw Cabot Total: 147,354

Axis Corporate 2019 59 Appendices Appendix IV - Key definitions used in the report

• AUM (Assets Under Management): the market value of financial assets under management.

• Distressed Portfolio: an asset portfolio with a high default risk; assets are priced at a discounted nominal value and their recovery depends on their security or collateral.

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): a financial indicator referring to gross earnings calculated before deducting financial expenses.

• EBIT (Earnings Before Interest and Taxes): company earnings before deducting interest and taxes.

• FTE (Full Time Equivalent): indicators measuring the number of full-time employees needed to perform the work done by a company.

• Collateral: security provided on the total customer assets of a financial institution.

• LTV (Loan to Value): the ratio of a loan to the value of the asset purchased with the loan.

• NPL (Non Performing Loan): loans that have been in default (both principal and interest) for 90 days or more. A loan is also considered non-performing when interest of at least 90 days has been capitalised, refinanced or deferred by mutual agreement.

• AHP: the average housing price expressed in m2.

• Provisions: the total amount of provisions on the balance sheet for a specific period..

• Coverage ratio: a ratio representing financial institutions’ level of protection against NPLs.

• REDs (Real Estate Developer Loans): loans associated with a developer with collateral.

• REOs (Real Estate Owned Assets): collateral or real estate assets resulting from an unsuccessful attempt by a financial institution to sell loans that it owns.

• Servicers: Financial and real estate asset management firms created from banks' real estate businesses, whose activities are to manage, monitor and optimise Real Estate portfolios.

• Asset Holders: financial and non-financial institutions that participate in the Real Estate market and own asset portfolios (financial institutions, Servicers, investment funds).

60 Assets Under Management REPORT About the Report Team

This document, prepared by the Axis Corporate business team, is for José Masip information purposes only. The figures, opinions and estimates contained Financial Services and Real Estate therein correspond to the date it was written and were prepared by the Partner firm itself or based on public and internal sources that we consider reliable. These have not been subject to independent verification. Luis Fernández de Nograro Any estimates this document may contain were made according to Financial Services and Real Estate generally accepted methods and should be taken as such, i.e., forecasts Managing Partner and projections. Joan Carbonell Financial Services and Real About Axis Corporate Estate Partner Daniel Meere We are an international business consulting firm dedicated to improving UK Managing Director companies’ business results, offering services ranging from strategic advice to establishing a business model and making a positive impact on operations. Jaime Fernández We work on complex global transformation projects advising clients and Director walking them through the transformation process. We are with you in every step of your company's life cycle. We increase companies’ value by focusing directly on growth factors such as increasing revenue, optimising Gonzalo Ortega costs and improving risk management. Director

For more information: Paloma García www.axiscorporate.com / [email protected] Senior Manager

At Axis Corporate, we have extensive experience in managing both Elena Párraga financial and real estate assets (AuM) throughout their life cycle, enabling Manager us to accumulate vast knowledge and a deep understanding of the business and the challenges these assets will face in the future. Ana Gutiérrez Our results-driven team specialises primarily in: Manager • Business development • Company management and brand value • Support for portfolio acquisitions and takeovers, maximising their value Víctor Porcar • Business intelligence development Manager • Increasing business model effectiveness • Improving operating model efficiency Maria Teresa Montes • Advanced management of IT systems Manager Acknowledgements Gema González We would like to give a special thanks to the Axis Corporate Real Estate Manager Team for their involvement in compiling and updating the information obtained from the many sources used. Enrique Lodoza We also want to take the opportunity to thank the marketing team for Manager their collaboration in designing and preparing this report. And above all, we want to thank our clients, without their invaluable help it would not have been possible to prepare such an in-depth report. Guillermo Porras Manager

Elisa Díaz Manager

The content of this document is protected by intellectual property law. Reproducing, transforming, distributing, publicly disclosing, providing access to, extracting, reusing, forwarding or using this content in any way, by any means or procedure, is expressly prohibited, except when legally permitted or expressly authorised by Axis Corporate.

2019 Axis Corporate 61 Assets Under Management. Ed. III Ed. Management. Under Assets

Barcelona Madrid Avda. Diagonal, 640. Calle Serrano, 55. 1ª planta. 1D. 08017 1ª planta. 28006 Barcelona (Spain) Madrid (Spain) Tel. + 34 902 547 444 Tel. + 34 902 547 444

Boston New York 60 State Street, Suite 700 477 Madison Ave, 6th Floor Boston, MA 02109 (USA) New York, NY 10022 (USA) Tel. +1 617 973-5760 Tel. +1 917 472-0631

Frankfurt São Paulo Frankfurter Welle An der Rua Funchal, 411, Welle 4 Frankfurt 60322 12ªandar Vila Olímpia (Germany) São Paulo – SP 04551-060 Tel. +49(0) 69/7593-70 (Brasil) Tel. +55 112364 0032 London 35-41 Folgate St London, E1 6BX (UK) Tel. +44 (0) 203 927 6410

axiscorporate.com

Axis Corporate is an international business consulting firm dedicated to improving companies’ business results, offering services ranging from strategic advice to establishing a business model and making a positive impact on operations. We have a team of 200 professionals working in our offices in Barcelona, Boston, Frankfurt, London, Madrid, New York and Sao Paulo. © Axis Corporate S.L. All right reserved. Designed and produced by the Marketing and Branding Department.