BFA-Bankia books biggest loss in Spanish corporate history

The banking group BFA-Bankia, which was nationalized in May after coming unstuck because of its exposure to the floundering real estate market, posted a massive loss last year of 21.238 billion euros, an unprecedented figure in Spanish corporate history, according to its financial results presented on Thursday.

Bankia, the listed commercial banking arm of its parent Banco Financiero y de Ahorros, alone booked a loss of 19.056 billion euros after minority interests. Since BFA does not fully own Bankia the loss attributable to its majority shareholder, the Bank of Spain’s Orderly Bank Restructuring Fund (FROB), amounted to 10.792 billion euros.

The group dedicated 26.845 billion euros to cleaning up its balance sheet, using funds that came from a 40-billion-euro bailout granted by Spain’s European partners to recapitalize its banking sector. Three other banks, Banco NCG, Catalunya Banc and Banco de Valencia, were also nationalized.

“These write-downs, along with the recapitalization measures approved on November 28 by the European authorities, allow the bank to start 2013 with a healthy balance sheet and from a solid position in terms of solvency and liquidity,” the bank said in a statement.

BFA-Bankia sought additional state aid of 17.959 billion euros last year after an initial injection of capital by the FROB, bringing total borrowings to some 23.5 billion euros. It also transferred 22.3 billion euros to the asset management fund Sareb, a so-called bad bank set up by the government to clean up the sector.

The biggest losers are the 350,000 retail investors that bought into Bankia when it listed

The group said it expects to return to profits this year and start to pay back the money it received from the state. Bankia’s chairman, José Ignacio Goirigozarri, said the bank aims eventually to provide a return on the state from the funds it has invested. After the transfer of assets to the FROB, Bankia’s credit portfolio is comprised of 60 percent of loans to individuals, 30 percent to companies, seven percent to the public sector and only three percent to real estate developers, compared with 17.2 percent at the end of 2011. The bank’s non-performing loan ratio rose to 13 percent from 7.6 percent a year earlier.

The group has liquid assets amounting to over 40 billion euros, which will allow it to cover liabilities that come due through to 2020.

While the state may hope to recoup some of what it has put into the bank, at the insistence of Brussels, the biggest losers by far are the some 350,000 retail investors that bought into Bankia when it listed in 2011 at 3.75 euros per share. Bankia shares closed Wednesday at 0.301 euros, down 99.7 percent from the initial public offer price.

The European Commission and the FROB are currently in talks to determine the extent of the write-down in Bankia’s nominal share price to absorb the losses posted. Talks center on a price of 0.01 euros, which will be that at which the 10.7 billion euros in convertible bonds injected by the FROB in Bankia are exchanged for equity. If the nominal value is set at 0.01 euros, Bankia’s capital will fall to only 20 million euros -- from 3.986 billion. Bankia preferred-share and bond holders will also convert some 4.8 billion in euros into shares.

If the conversion takes place at a nominal value of 0.01 euros per share, Bankia would have a total of outstanding shares of 1.5 trillion, by far the largest in the world.