Rodrigo Rato stepped down as head of the Bankia group as the government prepared a bailout of the lender and Prime Minister Mariano Rajoy retreated from his pledge to avoid using public money to save lenders.
Rato, a former International Monetary Fund Managing Director, proposed Jose Ignacio Goirigolzarri, ex-president and chief operating officer of Banco Bilbao Vizcaya Argentaria SA (BBVA), as executive chairman, he said in an e-mailed statement today in Madrid. The government is planning to inject funds into the lender by buying contingent-capital securities, an Economy Ministry official said earlier today.
Spain is struggling to douse speculation it will need an international rescue to shore up its banks. The Bankia group is key to Rajoy’s efforts to overhaul the industry. Its assets amount to almost a third of the Spanish economy and it held 38 billion euros ($49 billion) of real estate at the end of 2011, more than any other Spanish lender.
“Goirigolzarri was a very good leader and administrator at BBVA and he is very well-regarded as one of Spain’s best CEOs,” said Inigo Lecubarri, who helps manage about $300 million at London-based Abaco Financials Fund. “You couldn’t ask for someone better qualified to lead a Spanish bank that’s in trouble.”
Shares in Bankia (BKIA) fell as much as 6.2 percent, and traded 3.8 percent lower at 3 p.m. in Madrid, taking their loss since listing on the stock market in July to 37 percent. Spain’s 10- year bonds fell, increasing the yield 5 basis points to 5.78 percent.
The government may inject 7 billion euros into BFA-Bankia, El Confidencial reported, citing Economy Ministry officials it didn’t name. A ministry spokeswoman declined to comment.
Rajoy, battling to restore confidence in banks, opened the door today to using public funds to shore up the industry. He said it would be a “last resort.”
“The last thing I want to do is lend public money, as has been done in the past, but if it were necessary to get the credit to save the Spanish banking system, I wouldn’t renounce that,” he said in an interview with radio station Onda Cero.
To contact the editor responsible for this story: Emma Ross-Thomas at firstname.lastname@example.org