Spanish bank has published its country’s worst results yet, giving investors a share value close to zero
Spain’s answer to RBS – Bankia – published the worst results ever seen by a Spanish corporation, racking up 2012 losses of €19.2 bn (£16.6bn) as the nationalised bank drowned in a sea of toxic real estate left over from the country’s burst housing bubble.
The figures confirmed the dire fortunes of a bank formed out of a merger of seven of Spain’s ailing savings banks in 2010 as the government made a futile attempt to save them from disaster. Client flight during 2012 helped bring a 13% fall in total deposits.
Bankia became the focus of Spain’s banking crisis last year after auditors refused to sign off on the accounts presented by company president Rodrigo Rato, a former finance minister from prime minister Mariano Rajoy’s People’s party (PP) and one-time head of the International Monetary Fund. It is now taking €18bn in bailout funds from the country’s Frob bank restructuring fund, which had to borrow the money from the eurozone’s bailout fund as part of a €40bn rescue of several struggling banks.
Just months before being nationalised in May Bankia had been reporting €309m in profits for 2011. That figure eventually turned into €3bn in losses.
The bank’s former management is under investigation by the courts, with an investigating magistrate taking evidence in recent weeks from auditors Deloitte and former Bank of Spain president Miguel Angel Fernández Ordóñez. No one has yet been charged in the case.
Press reports suggested that holders of Bankia shares –which were sold aggressively to the bank’s own retail customers as it desperately tried to raise money in 2011 – will see their investment virtually wiped out.
The Frob fund has denied reports that, under pressure from the eurozone’s bailout funds, it is to give them a value close to zero.
Reuters reported that Brussels officials believe the shares, worth 29 cents on Thurs day, should be valued at just one cent each. Spain, according to the same report, is fighting for a 10 cent valuation. Retail clients bought the shares for €3.75.
Bankia has now dumped its toxic real assets in the government-backed Sareb “bad bank”, which received €37bn of assets from four rescued banks in December.
Sareb is now set to receive about €15bn of assets from four more banks, confirming its position as one of Europe’s biggest holders of real estate.
Bankia took provisions of €24bn in 2012 and insisted that the cleanout would enable it to return to profit this year.
“We start 2013 from a solid position, with a clean balance sheet, good solvency levels and an excellent liquidity situation. Our challenge now is to make Bankia a profitable institution that is able to return to society the support it has received,” Bankia boss José Ignacio Goirigolzarri said. “It will be a complex year, a year of challenges.”
Non-performing loans fell to 13% in December – worse than the Spanish banking average of 10.4%. The figure would have been around 15% had it not offloaded property on to the bad bank.
Bankia will be 70% government-owned once it completes the capital increase and must shrink its balance sheet by 60% as a condition of the rescue.
It is cutting 4,500 jobs and plans to raise €8bn by selling its portfolio of stakes in companies such as International Airlines Group – the parent company of British Airways and Iberia. It also plans to sell Florida-based City National Bank within six months.
Comments by European Central Bank President Mario Draghi on the euro’s recent strength prompt it to fall more than a cent against the dollar.
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