Spain: another banking bailout

Spain's Bankia to receive immediate aid after huge loss

Spain's national bank rescue fund said on Friday it will inject emergency liquidity into troubled lender Bankia (BKIA.MC) immediately after the bank reported losses of over 4 billion euros ($5 billion) in the first half of 2012

Reuters,

31 August, 2012

Bankia, nationalised by the Spanish government in May, lost 4.448 billion euros in the six months to end-June after provisioning 2.7 billion euros in the second quarter against bad debt and assets.

Spain's Fund for Orderly Bank Restructuring (FROB) said it would inject capital into Bankia immediately as an advance on European aid negotiated by Spain for its ailing banking sector in June. It did not specify how much capital would be given to Bankia.

"I am very satisfied with what the European and Spanish authorities have said because it means there is big support for our project," said Bankia Chairman Jose Ignacio Goirigolzarri.

A financial sector analyst in Madrid said Bankia's poor results were expected and that a capital injection from the FROB had also been seen as a possibility.

"The results are very bad, the provisions have really ruined the results, but in operating terms they are more or less what we were expecting," said the analyst, who asked not to be named.

MONEY OUT

Bankia, Spain's fourth largest lender after seven different savings banks were merged into one in 2010, said private sector deposits fell by 8.3 billion euros to 98.844 billion euros in the first six months of 2012.

The bank's bad loan rate reached 11 percent at end June, compared to 7.6 percent at the end of 2011.

Spain negotiated a 100 billion euro European Union rescue for its wobbly financial sector in June but Bankia had yet to receive any funds when it reported first half results.

The government also on Friday created a so-called bad bank to take over tens of billions of euros in defaulted loans and unsaleable property and to accelerate the clean-up of the banking sector.

Banks have had to take huge write-downs on toxic property assets in line with provisions ordered by the Spanish government, resulting in steep falls in profit even for relatively sound lenders such as Banco Santander (SAN.MC).

Capital outflow in Spain jumped almost 40 percent year-on-year in June, data showed on Friday. Capital outflow was 56.6 billion euros in June, compared to 41.3 billion euros in May.

BFA, Bankia's holding company, reported a net loss of 2.8 billion euros. ($1 = 0.7933 euros)