Bankia sees investor demand for Spain stake sale

MADRID Mon Feb 3, 2014 10:35am EST

A man uses an ATM machine at a Bankia bank branch in the Andalusian capital of Seville, southern Spain October 28, 2013. REUTERS/Marcelo del Pozo

A man uses an ATM machine at a Bankia bank branch in the Andalusian capital of Seville, southern Spain October 28, 2013.

Credit: Reuters/Marcelo del Pozo

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MADRID (Reuters) - Spain is preparing to start selling down its stake in Bankia SA (BKIA.MC), the bailed-out lender said on Monday, marking another milestone in the recovery from financial crisis of both the bank and its home country.

Bankia, which returned to profit in 2013, said it had already held informal talks over the disposal of the government's stake and its shares were attracting strong interest from foreign investors.

Bankia became the symbol of Spain's financial crisis when it lost more than 19 billion euros ($26 billion) in 2012 because of rotten real estate holdings and it needed almost half of a 41.3 billion euro European aid package for Spain's ailing lenders.

The finances of hundreds of thousands of small shareholders, including many retired savers, were practically wiped out during its rescue, making Bankia the target of fierce protests as a deep recession also squeezed Spanish consumers.

It is now becoming the unlikely poster child for Spain's economic recovery, while even rivals such as Santander (SAN.MC) have publicly urged the state to consider an early sale.

Spain, which has 68 percent of Bankia, has been considering selling a small part of its stake as soon as the first quarter of 2014, Reuters reported last month, citing official and banking sources.

"It's clear to me that there is appetite (for the stake)," Chairman Jose Ignacio Goirigolzarri told a news conference after the bank posted a 512 million euro profit for 2013.

The decision was down to the government but the bank had held informal talks about such a sale, he said, describing these as the first phase of an eventual privatization that will be done in chunks and could take around two years.

"It's important that this is done with the right timing ... that it's done well and leaves a good taste," he said, adding there was as yet no timetable or definitive plan for a sale.

Spain, which has until 2017 to fully privatize Bankia, is keen to emulate Britain's partial sale of its stake in Lloyds Banking Group Plc (LLOY.L), official sources have said. The UK sold 6 percent of Lloyds in September - five years after the bank's rescue - and the bank said on Monday it was preparing for a possible second sale.

Bankia's shares were up 1.6 percent at 1.3 euros by 1430 GMT. The stock, up more than 4 percent in the year to date, last month briefly hit the 1.35 euro per share level at which the government bail-out happened.

NOT IMPOSSIBLE

Goirigolzarri said it was "not impossible" to recoup all the Bankia rescue funds. Spain, which has spent over 61 billion euros propping up the financial sector since 2008 and plugged 22.5 billion euros into Bankia, has sold other nationalized lenders at a loss.

The bank, the fourth-biggest in Spain, said international investors held about 10.4 percent of its capital, up from 3.8 percent last May.

Still, some investors and investments bankers believe Spain should wait a few more quarters for Bankia to show it can sustain a recovery in revenue, as it completes a restructuring that has so far seen it cut 5,400 jobs through selling off businesses or closing offices and making redundancies.

Bankia posted higher-than-expected fourth-quarter net interest income (NII) - or earnings from loans minus funding and deposit costs - of 690 million euros, 7 percent better than in the third quarter and topping an average forecast of 674 million from analysts polled by Reuters.

The figures echoed improvements noted by peers after a fall in deposit costs, and the momentum should continue in 2014 now that Spain has exited recession and as lending picks up.

The BFA-Bankia group, including parent company BFA which has sold down some stakes in companies, also beat its own profit-after-tax goal of 800 million for the year by 18 million euros.

But Bankia undershot quarterly profit forecasts after a small spike in provisions against losses. It posted a 156 million euros profit after tax for the October-December period, less than the 171 million expected by analysts.

It's bad debts as a percentage of total credit, meanwhile, reached 14.7 percent at the end of December, above a November sector average of 13.08 percent. The bank has already been stripped of most its soured real estate loans and properties, which were transferred into a government-backed "bad bank".

Yet some analysts said Bankia may struggle to keep up the pace of its turnaround.

"Bankia's 2013 results included significant capital gains and non-recurrent results ... which allowed the group to offset provisions charges," Nomura analyst Daragh Quinn said in a note. "But we continue to see limited upside for recurrent returns."

(Editing by David Holmes)

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