BANKING MELTDOWN

Bankia chief says bailout was to "save depositors, not bankers"

Goirigolzarri confident nationalized lender can return taxpayers' money

Bankia Chairman José Ignacio Goirigolzarri.
Bankia Chairman José Ignacio Goirigolzarri. Luis Sevillano / EL PAÍS

It is now just over a year since José Ignacio Goirigolzarri took over the reins at Bankia. The lender had suffered the second-biggest bank failure in Europe, and needed nationalization as well as an injection of 22.424 billion euros of taxpayers' money, due to its disastrous over-exposure to the ailing real estate market. The chairman of the lender does not hide his pride as he explains that the lender is now "strong" and has a plan to pay back the state.

Goirigolzarri also acknowledges that Bankia has its work cut out in restoring its brand after selling complex hybrid debt instruments, such as preferred shares, to unsophisticated investors, who suffered huge losses. The investors were forced to share part of the burden of the around 40-billion-euro European bailout of the Spanish banking sector, the bulk of which went to Bankia.

"The challenge now is to convert this solid bank that we have into a profitable one," he said. "If you told me a year ago that we would be where we are now, I would have taken it, but the game has just started and we know we have a long, difficult road ahead."

The Bankia chairman is ruling out the need of further recapitalization of the bank, which is sticking to its target of earnings of 800 million euros this year and 1.2 billion in 2015 in order to be able to pay dividends and return taxpayers' money.

The challenge now is to convert this solid bank into a profitable one"

The bank's ability to make profits will be capped by its obligation to trim the scope of its operations as part of the terms of the European bailout. The downsizing involves the closure of 1,110 offices and compensation for 4,500 employees.

Goirigolzarri acknowledges the preferred-share fiasco had caused the bank to lose deposits. The bank acknowledged "errors" in the sale but is stopping short of offering an apology, as the also-nationalized Novagalicia did.

He says after heavy deposit withdrawals between May and September of last year, the situation has now stabilized, while the bank's investment funds have been gaining market share over the past four months.

Although Bankia is now a public bank, Goirigolzarri says he does not feel under pressure to step up lending. "We should provide loans because it's good for profits."

The Bankia chief believes the bank should not be grouped together with other nationalized lenders such as Novagalicia and Catalunya Bank. "Bankia is a well-defined project and it is good that it remains independent," he says.

Asked about the fact that the nationalized banks are still evicting people from their homes for failing to pay their mortgages, and the public clamor over bankers' bonuses, Goirigolzarri has a different take on the situation. "They say the banks and bankers are being rescued but not individuals, but the injection of capital into Bankia was not carried out to spare shareholders, unfortunately for them.

"Bankers have also not been protected because all of the managers of this bank have been changed during the time I have been here without compensation of any type," he continues.

"Who has been saved? Depositors. Seven and a half million depositors. And depositors are people," he concludes.

Goirigolzarri insists that Bankia is doing everything possible to ensure mortgage holders do not lose their homes, noting that the bank has offered new home-loan terms to around 88,000 customers, equivalent to about 10 percent of its mortgage portfolio. He said the bank has also allowed 4,000 customers to clear their mortgage debt with the bank by simply handing over the property in question to Bankia, an arrangement known as dation in payment.

Bankia on Friday agreed the sale of its City National Bank of Florida to Chile's Banco de Crédito e Inversiones for 683 million euros, 150 million less than what Caja de Madrid - one of the seven savings banks that merged to form Bankia - paid to acquire it in 2008. However, since it had written down the value of the bank on its books, Bankia claimed capital gains from the operation.

Former Caja Madrid chairman Miguel Blesa is facing charges of mismanagement and misappropriation of funds related to the purchase of the Florida bank.