Bankia inherits 2.5-billion-euro exposure

Bankia says it has inherited more than 2.5 billion euros of property exposure through risky loans made to developers by the savings banks — or cajas, as they are called in Spain — that merged to create the new entity.

Of the five major real estate clients, three are in arrears and one has been listed in the substandard category — up-to-date with its loan payments but still at risk of falling back — according to Bankia's prospectus, which has been filed with the Spanish stock exchange regulator CNMV.

Bankia, the entity created through the merger of seven savings banks and controlled by Caja Madrid and Bancaja, hopes to draw between 3.6 billion euros and 4.5 billion euros when it begins floating shares on the Spanish exchange later this month. The price is expected to be between 4.41 and 5.05 euros per share.

Banco Cívica — the result of the merger of CajaSol, Caja Navarra, CajaCanarias and Caja de Burgos — hopes to also draw between 742 million euros to 1.04 billion euros when it gets a listing on the bourse. The price of the shares are expected at between 2.70 to 3.80 apiece.

According to the information contained in Bankia's brochure, the total amount of exposure is listed at 2.506 billion euros.

"Of these five clients, three can be classified in doubtful situations, for a total of 1.638 million euros. [...] On the other hand, a fourth client of this group, which maintains a position of 407 million euros, is classified as substandard...," the prospectus reads. It does not identify these real estate companies by name.

Although Bankia has left the bulk of problematic property financing loans to Banco Financiero y de Ahorros (BFA) — the holding company set up to group together the seven cajas — the new entity still has high exposure to the real estate and construction sectors.

Bankia's executive chairman Rodrigo Rato, who also served as chairman of the International Monetary Fund (IMF), had suggested earlier that market turmoil caused by the debt crisis in Greece could delay its debut on the Spanish stock market, but this week officials said they would go ahead with the offering on July 20.

Antonio Pulido, co-president of Banca Cívica, said Thursday that the bank is "very satisfied" with its planned stock market listing, which is also scheduled for July 20.

Despite the current market jitters, Pulido said: "We are conscientious of the situation we are currently in [but] we won't know until October or November whether the situation has improved or gotten worse."

Pulido said that while the current financial situation was "difficult and complex" it was also "a moment filled with hope and opportunities." He made his comments to prospective investors after filing Cívica's prospectus with the CNMV.

Banco Cívica was launched last year while Bankia — a merger of Caja Madrid, Bancaja, Caja de Canarias, Caja de Ávila, Caixa Laietana, Caja Segovia and Caja Roja — was unveiled in March.

The government had set in motion the chain of events that forced the troubled savings banks to find mergers to avoid default and an expensive public bailout.

Of the 45 savings banks that once operated throughout Spain, only around 20 still remain.