Spanish banks stoke fears of costly bailouts
FEARS were yesterday growing that Madrid will cough up billions to bail out Spain’s ailing banks as the chairman of Bankia, one of the country’s biggest lenders, quit suddenly.
Spanish Prime Minister Mariano Rajoy signalled that his government is lining up funds for a mass bailout as rumours circulated that Bankia, which only floated last summer, could need a capital injection of up to €10bn (£8.06bn).
Rajoy told a Spanish radio station: “If it were necessary to get the credit to save the Spanish financial system I would not hold back from doing what other European Union countries have done – loan them public money – but it would only be as a last resort.”
Coupled with the departure of Bankia chairman Rodrigo Rato yesterday, Rajoy’s comments appeared to confirm speculation that the publicly listed lender is heading for a state rescue.
Rato, who is a former minister and a close political ally of Rajoy’s, handed over the reins to Jose Ignacio Goirigolzarri, who was previously chief executive of BBVA, a rival lender.
Bankia’s float on the Madrid stock exchange had been hailed as a huge success for the model of grouping together struggling cajas. The deal made it one of Spain’s few lenders to avoid a tapping up taxpayers for a recapitalisation last year.
But since then its stock has fallen by more than a third as the Spanish property market has deteriorated. Analysts at Nomura have forecast a “new, deeper recession” for Spain and highlight that the proportion of mortgages classed as non-performing loans (NPL) is now close to 15 per cent.
Reports suggest that the Spanish government is working on plans to transfer banks’ worst real estate assets into a state-managed fund for winding down. The plan could be controversial because it will stoke fears that the Spanish government might need help from Europe’s bailout fund in order to absorb the losses.
Bankia did not respond to a request for comment.