Bankia is not worth nothing; the reality is revealed to be much worse than that

Bankia is worth less than nothing. The value of a group made up of seven savings banks, including the once powerful Caja Madrid, has been estimated at minus 13.63 billion euros ahead of the nationalization process of 100 percent of its parent company, Banco Financiero y de Ahorros (BFA). This was the result of the valuation presented to the bank's board of directors on Wednesday. This means that the seven savings banks that created BFA by joining forces are left empty-handed and without future dividends to use on their social and cultural work, traditionally a defining characteristic of regional lenders.

The negative appraisal comes ahead of public capital injections that include 4.46 billion euros in capitalization and a further 19 billion euros requested by Bankia chairman, José Ignacio Goirigolzarri, who took over from Rodrigo Rato, a former IMF chief.

This is not the first time that a banking group has been found to be worth nothing. It happened to Unnim, while CatalunyaCaixa and Novacaixagalicia still hold on to minority shares in the nationalized banks through which they conduct their business. But these two lenders now find themselves in further need of capital, which may lead to their complete expropriation after all. Bankia was taken over by the state in May, triggering investor concerns over the country’s banking sector, which has been severely exposed to the real estate crash and continues to hold large amounts of rapidly devaluating land and property.

On Wednesday, the Bank of Spain warned that second-quarter results will likely confirm a deepening of the recession, following a GDP contraction of 0.3 percent in the first three months of the year.