Bankia sees 150,000 clients in arbitration on hybrids

Nationalized bank has already received 29,000 requests

José Sevilla, the head of the Office of the Chairman of the nationalized bank Bankia, on Thursday said that he expects more than 150,000 customers who had acquired preferred shares or subordinated debt from Bankia, which they believe were mis-sold to them, will seek arbitration to recover the money they invested.

Investors, many of them financially unsophisticated, have made huge losses on complex hybrid instruments such as preferred shares and subordinated debt issued by Bankia or one of the seven savings banks that emerged to form the new lender. An estimated 300,000 Bankia clients are locked into these products.

Bankia has opened a free arbitration services for all holders of such instruments. A number of courts have already ordered Bankia and other nationalized banks to return the amounts invested by customers.

“We believe that arbitration is a process that could provide a solution to customers and help them recover the money they invested,” Sevilla said in an interview with state radio RNE.

Bankia on Wednesday announced that over 29,000 retail investors had already requested arbitration in the 12 working days that the scheme has been in operation. “We believe that this is a very transparent process for the client that is free and doesn’t close the door on legal action,” Sevilla said.

Bankia was nationalized along with CatalunyaBanc and NCG Banco after coming unstuck because of excessive exposure to the ailing domestic real estate sector. All three are in a process of restructuring with a view to them being privatized to recoup taxpayers’ money. It has been suggested that Catalunya Banc and NCG Banco be merged around Bankia, but that idea is losing weight with the government.

Sevilla said the best alternative for Bankia is to “follow its path.” “We have a project we are very enthusiastic about and committed to and we should not allow ourselves to be distracted from that,” he said.

A year after Bankia was nationalized, Sevilla said the bank is in “much better shape,” pointing to the fact it made a profit in the first quarter after posting the biggest-ever loss in Spanish corporate history last year of almost 20 billion euros.

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