Spain’s Bankia says sure of getting massive state bailout

Spain’s fourth-biggest bank Bankia said yesterday it was certain of securing the €19bn ($24bn) in state aid it is seeking in the largest bank bailout in the country’s history. Bankia president Jose Ignacio Goirigolzarri sought to reassure investors and the public about the future of the struggling bank at a press conference called the day after it announced huge losses and asked for a government rescue. The plight of Bankia — which holds some 10% of the nation’s bank deposits — has added to the concerns over the massive debt crisis gripping Spain and the rest of the eurozone. “I am certain that the Spanish state will obtain the financing so we will receive the €19bn. That’s the commitment,” said Goirigolzarri, adding that he expected to get the funds in July. The funding will be part of a re-capitalisation plan which the bank’s board approved on Friday and is backed by the government and the Bank of Spain. At the press conference in Madrid, Goirigolzarri stressed that after the re-capitalisation, Bankia would be “solid, efficient and profitable”. The Spanish government has already spent €4.5bn on Bankia after the lender was partially nationalised earlier this month. The new bailout will bring to €23.5bn the total amount of the government’s rescue funding for the bank, which was formed in 2010 from a merger of seven troubled regional savings banks. Bankia had to revise its 2011 results to show a net loss of €2.979bn due to write-downs in its loan portfolio, instead of a net profit of €309mn. Spanish banks are at the heart of market fears that Spain itself, the eurozone’s fourth-largest economy, could be forced to seek an international financial bailout. Under the re-capitalisation plan it approved on Friday, Bankia’s parent group Banco Financiero de Ahorros (BFA) will ask Spain’s bank restructuring fund FROB to subscribe to a capital increase of €19bn. Bankia will then launch a €12bn capital hike which will be underwritten by BFA. Goirigolzarri yesterday defended the bank’s former management team. “We must be absolutely careful in our judgements,” he said, noting that his predecessor Rodrigo Rato had to deal with a “very complex” situation. Rato, a former economy minister and head of the International Monetary Fund, and his team had been forced to resign. “I am not here to launch a purge,” Goirigolzarri said when asked about a possible probe into events at the bank, whose shares have plunged to half their value since listing in July 2011i. Goirigolzarri blamed the massive loss on the economic crisis, which saw the collapse in 2008 of Spain’s real estate market — a pillar of the country’s economy — after a decade-long boom. Bankia had the sector’s largest exposure to the property market of €37.5bn at the end of 2011, of which €31.8bn were classed as problematic, according to figures from the Bank of Spain. Standard & Poor’s on Friday downgraded Bankia to BB+, one notch into junk status, from BBB- and also cut its rating for the parent group BFA, which was already in the junk status of BB-, to B+, four notches into junk territory. Standard & Poor’s also cut its rating for Bankinter, Banco Popular and Banca Civica. Daniel Pingarron, an analyst at Spanish brokerage IG Markets, said Friday the injection of public funds into Bankia to save it “will not change things very much”. “What will happen is the FROB funds will run out, the fund will have to be replenished with public debt, and that does not sent a message of confidence,” he added. Bankia is considered key to the country’s financial system and therefore cannot be allowed to fail as it would contaminate the entire sector. The Expansion newspaper said eight banking institutions in Spain had received public funds totalling €32.869bn and another €6.2bn from private investors. Prime Minister Mariano Rajoy’s conservative government this month instructed Spain’s banks to set aside an extra €30bn in 2012 in case property-related loans go bad, on top of €53.8bn required under reforms enacted in February.