MADRID: Spain's Bankia yesterday prepared to sell stakes it holds in companies as part of its clean-up after a state rescue of the real estate-laden bank that has so far cost 23.5 billion euros ($29.40 billion).
Bankia asked for a higher-than-expected 19 billion euros in government help on Friday, in addition to 4.5 billion the state has already pumped in, to cover possible losses on repossessed property and loans, in the biggest bank rescue ever in Spain.
Losses at Spanish banks, which are rising in an economic downturn with 24.4 percent unemployment, are at the heart of worries that Spain could have to seek international aid and take the euro zone debt crisis into a dangerous new stage.
Among the newly recognized potential losses at Bankia and its parent group BFA are a 1.6 billion euros write down on stakes in big Spanish companies, including a 12 percent chunk of International Airlines Group and a 5.3 percent stake in energy firm Iberdrola.
FROM: REUTERS
European Union regulators are set to sign off on the Bankia rescue plans in June, since it is being nationalized, but are likely to impose conditions such as stake sales.
"In the future logically it's in our plans, and also because of European requirements, we'll have to sell off stakes," Chairman Jose Ignacio Goirigolzarri told reporters in a news conference.
The hike in capital at Bankia comes amid a broader audit of the Spanish banking sector, which has already raised worries more lenders will need help to cover deeper potential losses on property loans and souring consumer debt.
Spain's government will have to go to debt markets to raise the funds for Bankia at a time when its borrowing costs have jumped and it must pay a premium of almost 5 percentage points over German government debt.
Bankia submitted its entire credit portfolio to a stressed scenario of high unemployment and a prolonged economic downturn. Among the potential losses that Bankia has now accounted for are 900 million euros in debt that could sour in its portfolio of refinanced loans.
"We looked really deeply at the refinanced portfolio," Goirigolzarri said.
Spain's government, which is racing to reassure investors about the health of its banking system, had previously put the amount of state help needed to help lenders at 15 billion euros - a figure now largely surpassed by what Bankia alone will need.
Bankia plans stake sales
