Bankia bailout authority moves closer to diluting shareholders

Tim Wallace
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SHARES in Spanish lender Bankia plunged yesterday on fears the recapitalisation plan for the group could almost wipe out investors.

The nationalised institution applied for a European rescue worth €18bn (£15.48bn), leaving shareholders fearing the worst.

Spanish newspaper reports that the Fund for Orderly Bank Restructuring (FROB) would value shares at €0.01 sent the stock tumbling.

But the FROB gave no valuation, instead simply warning that a dilution will play a part in the recapitalisation.

“The entity’s negative valuation and its end-2012 projected results indicate the price at which the FROB (will participate in Bankia) will entail a big reduction in the shares’ nominal value in order to absorb losses,” the FROB said.

The bank’s stock opened down 22.65 per cent at an all-time low, but rose a touch later on to end the day down 1.7 per cent.

The group was put together as a merger of regional lenders but has struggled through the housing bust.