Bankia (3rd bank in size in Spain) nationalized

[Murazor]

From here.

Spain markets sink as Bankia nationalization looms

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) — The Spanish government was reportedly preparing Wednesday to nationalize embattled lender Bankia SA, as markets here came under intense pressure, with bond yields soaring as investors fretted over the banking system and political deadlock in Greece.

Yields on 10-year Spanish government bonds ES:10YR_ESP -0.0086% shot up 23 basis points to rise above 6% for the first time since April. Read about turmoil in the euro-zone credit markets.

That weighed on the IBEX 35 stock index XX:IBEX -2.77% , which sank 2.8% to 6,812.70. The euro EURUSD -0.52% dropped to $1.2954 as investors worried whether Greece may be forced to leave the euro.

Financial markets' relatively calm reaction to the Greek turmoil masked rising risks Greece is on a road that leads to its exit from the euro zone, with hard-to-predict consequences.

Spanish banks led declines across Europe, with Bankia ES:BKIA -5.84% shares down nearly 6%.

Media reports, citing government sources, said the board of Bankia would ask the government to take a stake in the lender. The move would come via exchanging €4.5 billion into rescue funds that BFA, Bankia’s parent, has already received from the Spanish bank restructuring fund (FROB). It will result in an effective nationalization of the bank.

The announcement was expected after the board meetings to be held by Bankia and parent BFA on Wednesday. A spokeswoman for the Spanish Finance Ministry said no comment would be made until the close of the board meetings.

Focus on Bankia — created from the merger of seven savings banks, or cajas, and part of the dramatic makeover of the Spanish banking industry — intensified after its high-profile chairman, Rodrigo Rato, a former International Monetary Fund chief, stepped down late Monday, reportedly to make way for a broader cleanup at the bank.

Bankia said Wednesday that D. Jose Ignacio Goirigolzarri, a former chief executive of BBVA SA BBVA -5.54% ES:BBVA -4.73% , would replace Rato.

The Finance Ministry spokeswoman also denied market rumors that the government would bring forward its plans for a larger cleanup of its banking sector, due to be announced after Friday’s regular cabinet meeting.

A report by Reuters said the Spanish government would ask banks to set aside another 35 billion euros ($45 billion) against loans to builders. The government has already demanded the banks set aside €53.8 billion in provisions from reforms announced in February.
Troubled Bankia

Reuters
A 2011 poster advertising savings bank Bankia as the top bank of a new-style banking system.

Analysts at J.P. Morgan Cazenove had spurred some selling of Bankia earlier in the day after recommending a downgrade to underweight from neutral. They predicted an increased capital level at the bank, via convertible equity, which would be dilutive for current shareholders.

In the fourth quarter of 2011, Bankia had €36 billion in problematic assets, the analysts said, or 17% of its total, with a coverage ratio of just 36%. They said provisioning above 55%, or an extra €6.9 billion, would be required to cover those assets.

Financial markets have been unable to shake their unease in general over Spanish banks, at the heart of the country’s economic issues since the housing market collapsed in 2008, burdening the financial sector with troubled loans, and contributing to the current unemployment rate that was over 24% in the first quarter.

Sole Pellon, an analyst with IG Markets, said Spanish stocks were correcting after an “unjustifed” 2.7% rally for the IBEX on Monday. She cited uncertainty generated by Greece’s inability to form a new government and the growing opposition in that country to the terms of the recent bailout scheme.

And expectations of higher reserve requirements for banks to buffer against bad loans is pressuring banks, she said. “This, which is aimed at trying to generate confidence in our financial system, will have a negative repercussion on the accounts of the banks.”

Barbara Kollmeyer is an editor for MarketWatch in Madrid.

At this point, all of the above is a done deal and things are expected to get interesting over the next few days.

[KrauserKrauser]

Nothing to see here. Move along.

[Murazor]

Well, shit just got real.

Spain's Bankia seeks 19bn-euro bailout from government
Continue reading the main story
Bankia history
Bankia headquarters

Formed in December 2010 from merger of seven troubled banks
Most toxic assets moved into holding company BFA
Listed on the Madrid stock exchange in July 2011
Chairman Rodrigo Rato resigned earlier in the month before Bankia was part-nationalised

Continue reading the main story
Eurozone crisis

Spain's blame game
Q&A: Is Santander UK safe?
Q&A: Spain's woes
What if Greece leaves the euro?

Spain's fourth-largest bank, Bankia, has asked the government for a bailout worth 19bns euros ($24bn; £15bn).

Bankia also restated its results - now saying it made a 2.98bn-euro loss for 2011 rather than the 309m euros in profit it announced in February.

Earlier on Friday, trading in Bankia shares was suspended on the Madrid stock exchange while its management put together a restructuring plan.

Bankia has already been bailed out because of its bad property loans.

After a meeting of the board on Friday, Bankia's parent Banco Financiero y de Ahorro (BFA) asked Spain's bank bailout fund, FROB, to inject the 19bn euros.

Bankia will then issue 12bn euros in capital that will be underwritten by BFA.

The bank said that the "recapitalisation measures strengthen the group's solvency, liquidity and stability".

Rating agency Standard and Poor's has also lowered the credit rating of Bankia and four other Spanish banks.
Partly-nationalised

Two weeks ago, Bankia had a 4.47bn-euro loan by the Spanish bailout fund converted into a 45% stake in the bank.

Bankia had to reassure its savers last week that their money was safe after a Spanish newspaper reported a run on the bank.

Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets.

Its shares fell 7.4% on Thursday to close at 1.57 euros, which is 58% down from their listing price in July 2011.

There have been four attempts by Spanish governments to shore up the banking system since the global banking crisis of 2008.

As part of the latest plan, lenders are having to make 30bn euros of extra provisions to cover potential losses on property loans, which comes on top of 54bn euros they were ordered to set aside in February.
Regional trouble

The health of Spain's banking system is key to whether the country eventually needs to seek a bailout itself from the eurozone and the International Monetary Fund.

Spain's credit rating was downgraded by S&P last month on the basis that it would probably have to take on more debt to support its banks.

Also on Friday, there were appeals for help from another Spanish institution - its wealthiest autonomous region, Catalonia.

"We need to make payments at the end of the month," said Catalan president Artur Mas. "Your economy can't recover if you can't pay your bills."

Catalonia represents one-fifth of the Spanish economy.

It has to take out 13bn euros of loans this year to refinance maturing debt, not to mention funding whatever deficit it has for the current year.

The regions have been having trouble borrowing money commercially, so the central government has given them a special credit facility from the Official Credit Institute (ICO).

Those credit lines run out in June and the government has said it will come up with a new mechanism to provide credit for the regions, but it is unclear what form the help should take.

Bankia has officially requested from the state nineteen plus billion euros (for reference, Spain has collected some 150 billion euros in taxes last year) to honour their short term debt today and it is believed that they need to raise money to the tune of one hundred billion euros in the next three to four years, something that they have no chance whatsoever of doing.

So... this is it, I think. Either Europe steps in to shore up the Spanish government when it tries and fails to finance Bankia's debt or the bank is allowed to fall and the dominoes start falling. Either way, we are so screwed that it ain't even funny.

[Col. Crackpot]

Bankia has officially requested from the state nineteen plus billion euros (for reference, Spain has collected some 150 billion euros in taxes last year) to honour their short term debt today and it is believed that they need to raise money to the tune of one hundred billion euros in the next three to four years, something that they have no chance whatsoever of doing.

So... this is it, I think. Either Europe steps in to shore up the Spanish government when it tries and fails to finance Bankia's debt or the bank is allowed to fall and the dominoes start falling. Either way, we are so screwed that it ain't even funny.

Nevermind Bankia, Where are the Spaniards getting the money to bail out Catalonia ?

[Murazor]

Nevermind Bankia, Where are the Spaniards getting the money to bail out Catalonia ?

Thing is...

It is the autonomic Catalonian administration, rather than Catalonia itself.

Overall, Bankia is a) a much larger sinkhole and b) the political priority for the government (since Bankia is pretty much controlled by the neocon branch of the ruling party and has hostages in the form of a majority of the business in Madrid, which is a traditional fiefdom of the right for a couple of decades now).