Spain admits Bankia is being lined up for rescue by this Friday
THE SPANISH government conceded yesterday that it is planning a state rescue of Bankia, with the details to be unveiled on Friday.
Spain’s economy minister Luis de Guindos said depositors should not flee the bank, but markets are now expecting a bailout to the tune of €7-10bn – though analysts say it is not clear if that will plug the gap caused by a legacy of toxic property loans.
The group that owns Bankia, BFA, has already received a €4.5bn cash injection, but Bankia itself – which is a grouping of local savings banks – avoided a direct rescue and instead floated in Spain last summer after convincing retail investors to buy its stock.
Any bailout is likely to involve a change in ownership structure between BFA and Bankia as well as a management overhaul. In its latest results, BFA claimed that its core capital was 8.2 per cent – just below the nine per cent regulatory minimum.
But UBS analysts point out: “BFA still values Bankia, in its individual accounts, at its book value (Bankia trades on 0.3 times book value), listed stakes (Mapfre, NH, Indra) are not fully marked to market and we estimate further provisions could be required to increase coverage of repossessed real estate assets above the current 50 per cent given land exposure.”
That means a rescue of the group could balloon beyond current estimates, the analysts suggest.
The Bank of Spain, the country’s central bank, has been trying to force its banks to deal with their legacy of bad real estate loans for months, with the result that many have ended up seeking state recapitalisations.
But Spain’s new government had hoped to avoid state bailouts and was insisting until recently that none would be necessary.
European officials said they have yet to be informed of the rescue plans for Bankia, however. They are required to be told under EU state aid laws.
It is also not clear to what degree Spain could tap Eurozone resources to rescue its banks. Many analysts are expecting that it will call upon the Eurozone’s bailout fund for help.