| MADRID, March 22
MADRID, March 22 As Spain's nationalised Bankia
awaits an imminent announcement on the valuation of
its shares, the last step in the clean-up of the bank, the
government is pressing ahead with a new partial merger which
could slow its recovery.
The tens of thousands of Spaniards who bought shares in the
savings bank in 2011 will find out later today that each share
they hold is worth just 0.01 euro, a valuation insisted upon by
EU regulators as Bankia prepares to get 18 billion euros ($23.3
billion) of European rescue funds.
While the bank is showing tentative signs of recovery,
official and banking sources said the government will hire an
international consultant to come up with a plan to partially
merge Bankia with CatalunyaBanc and NCG Banco, two other rescued
lenders, which it wants to operate under a single holding
The plan emerged unexpectedly earlier this month after the
Bank of Spain failed to auction off CatalunyaBanc. The cancelled
sale was a sign of possible cracks emerging in the country's
ongoing financial reform.
Bankia's executives have not yet been briefed on the plan.
"It is an unexpected distraction. Things were starting to
fall in line well," said a banking source with knowledge of
After requesting a bailout last year and meeting strict
conditions such as imposing steep losses on small savers who
invested into the bank, the announcement of the valuation on
Friday was meant to mark a fresh start for the lender.
Bankia in February reported tentative signs of recovery and
said it would return to profit this year after deposits rose at
the end of 2012 and it began cutting costs.
The other two banks, however, are expected to report losses
in 2013 and 2014. Also, the government could end up having to
renegotiate with the EU some terms of the rescue of the banks,
if their operations are joined.
The government insists it will not fully merge the three
banks and that the lenders will join forces on marketing,
negotiating terms on major purchases and other
It also says that creating a single holding operated by
Bankia's top executives will not weigh on the lender's capacity
to apply its European Union-agreed roadmap.
"Absolutely not. This will add value, not cut value," a
source close to the government said, adding that the European
authorities have been briefed on the plan.
"It makes sense for Bankia to lead the project because it
has an impeccable management team and it also has the biggest
The process is still at an early stage and could change over
time. Spain's financial sector restructuring has gone through
several stages over the last five years and the model of
grouping several commercial brands under a single holding failed
when it was tried previously.
It led banks involved in such operations to later fully
merge, helping shrinking Spain's banking sector from more than
45 lenders to just over 10 today.
($1 = 0.7737 euros)
(Editing by Fiona Ortiz and Elaine Hardcastle)