Bankia shares flat on debut despite discounted IPO price

Performance contrasts with strong recovery in market

Bankia on Wednesday had a less than auspicious debut on the Spanish bourse despite slashing the price of its initial public share offering and there being a strong recovery in the broad market.

Bankia's shares began trading at midday at 3.66 euros, down 1.87 percent on its IPO price of 3.75 euros. It fell by as much as 6.4 percent to 3.51 euros before Bankia itself and other banks in charge of placing the shares stepped in to prop up the price. It eventually closed at the IPO price of 3.75 euros.

The blue-chip Ibex 35 index closed up 3.06 percent at 9,732.80 points as the major banks performed strongly. Santander added 5.02 percent, while BBVA put on 4.36 percent. The spread between the yield on the Spanish benchmark 10-year government bond and the German equivalent narrowed 21 basis points to 321 basis points after having hit a euro-era high of 376 basis points last week.

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Bankia's listing price was at a 15-percent discount to the minimum price included in the prospectus for the IPO as the bank tried to curry demand, which nevertheless barely covered the amount of shares on offer. Bankia ? the commercial banking of an amalgam of seven savings banks ? raised 3.4 billion euros from the IPO.

Bankia's listing created a benchmark for the Spanish savings-bank sector's ability to tap the stock market as a commercial bank after a process of consolidation that considerably slimmed down the sector through a series of mergers.

Banca Cívica ? also the product of the merger of a number of savings banks ? is due to list today. It set its IPO price at 2.70 euros, the minimum of the range included in its prospectus.

"With this step, we have shown that the savings banks are capable of adapting themselves to a much more demanding and complex environment, transforming ourselves into listed firms without losing our identity," Bankia Chairman Rodrigo Rato said. "Bankia's IPO has been considered a reference point for the Spanish banking industry. We have achieved this in the middle of an authentic market storm."

With assets of some 280 billion eruos, Bankia is regarded as being of systemic importance to the Spanish banking sector.