Bankia Group to Seek EU19 Billion From Government to Restructure
By Charles Penty - May 26, 2012 5:22 AM GMT+1000
The Bankia (BKIA) group, a Spanish lender nationalized earlier this month, will seek 19 billion euros ($23.8 billion) of government funds as it provisions against real estate and non-property loans.
The group will ask the state’s bank rescue fund to provide the money by buying shares in its parent company, Banco Financiero y de Ahorros, it said in a filing to regulators today after a meeting of the board of Bankia SA, its listed arm. The group needs a further 4 billion euros to cover real estate on top of provisions already ordered by the government, and 5.5 billion euros for the rest of its loan book, it said.
The unraveling of Bankia has deepened concern about the health of Spain’s banks and increased the government’s financing costs as it struggles with the debt crisis. The restructuring costs for BFA, which come on top of 4.5 billion euros from a first government bailout in 2010, compare with a May 11 estimate from Economy Minister Luis de Guindos that less than 15 billion euros of public funds would be needed to support the whole industry.
“Bankia is the tip of an iceberg as we’ve been saying all along,” said Tobias Blattner, an economist at Daiwa Capital Markets in London, in a phone interview today. “It’s a very large institution, it’s systemically important and it needs to be dealt with properly.”