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Dublin: 13 °C Monday 20 October, 2014

Spain’s bailed-out Bankia plunges on market

The lender is at the heart of a crisis in the bad-loan ridden Spanish banking system.

Image: Daniel Ochoa de Olza/AP/Press Association Images

SPAIN’S BAILED-OUT lender Bankia plunged on the stock market yesterday after banking authorities said it had a negative of value of €4.148 billion euros.

Shares in Bankia, which is at the heart of a crisis in the bad-loan ridden Spanish banking system, slumped 13.7 percent to 59.2 cents in morning trade.

Spain’s state-backed Fund for Orderly Bank Restructuring, or FROB, said the previous day that Bankia had a negative value of 4.148 billion euros and its parent group BFA a negative value of €10.444 billion.

Bankia-BFA is to receive about €18 billion in public aid. BFA’s capital is to be expanded by €13.459 billion in addition to €4.5 billion extended to the lender in September, the FROB said.

Doubts

Doubts hung over the true worth of shares in Bankia, whose €20-billion bailout by the government in May prompted Spain to seek funding of up to €100 billion from its eurozone partners for the banking sector.

“We don’t know how much these shares will be worth,” said Soledad Pellon, analyst at brokerage IG Markets. It was clear, however, that their value would be diluted by the increase in capital, she said. “This uncertainty has unleashed selling.”

Spanish banks are still struggling with a mass of loans that turned sour after a property bubble collapsed in 2008.

A first slice of €37 billion in eurozone aid is aimed at cleaning up four nationalised banks: Bankia, NovaCaixaGalicia (NCG), Catalunya Banc and Banco de Valencia.

The four banks are to receive the capital within days, the FROB said, enabling them to meet requirements that they have a top quality “core capital” equal to nine percent of total assets.

Read: Worst of the euro crisis is ‘behind us’, says German finance minister>

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