Bankia Falls Most in Month After Spain Valuation: Madrid Mover

Bankia SA (BKIA) shares fell the most in a month after Spain said the lender has a negative value of 4.15 billion euros ($5.5 billion) in an exercise to determine how much of the rescued lender remains in shareholders’ hands.

Bankia dropped as much as 15.5 percent, the most since Nov. 30, to 58 cents, taking the loss since the shares were first sold to the public in July 2011 to 85 percent.

Bankia group, including its parent, Banco Financiero y de Ahorros, is set to receive 18 billion euros of European funds, making it the largest recipient of the country’s bank bailout. The valuation published yesterday by Spain’s bank-rescue fund will help determine how much of the lender current shareholders will continue to own after it is recapitalized.

In a first phase of the recapitalization, Bankia will issue 10.7 billion euros in contingent convertible bonds, which its parent company will buy. They will convert into ordinary shares early next year as part of a capital reduction. That process will make sure that the “shareholders are the first to bear losses or restructuring costs,” Spain’s FROB bank-rescue fund said late yesterday in a statement.

Bankia was formed in 2010 from the merger of seven Spanish savings banks and traded on the stock market last year as part of the previous government’s efforts to clean up an industry reeling from real estate losses. The initial public offering, carried out to meet a government deadline, hinged on support from the banks’ retail clients.

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net