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Bankia Raises More Than 3 Billion Euros in IPO After Price Cut

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Bankia originally planned to sell shares at 4.41 euros to 5.05 euros. Photographer: Denis Doyle/Bloomberg
Bankia originally planned to sell shares at 4.41 euros to 5.05 euros. Photographer: Denis Doyle/Bloomberg

Bankia SA, the Spanish lender forged from the merger of seven banks, raised more than 3 billion euros ($4.2 billion) in an initial public offering after slashing the price as much as 26 percent.

The shares sold at 3.75 euros each, the Madrid-based lender said in a statement sent by e-mail late yesterday. Bankia originally planned to sell shares at 4.41 euros to 5.05 euros. The shares are scheduled to begin trading tomorrow in Madrid.

The government has pushed Bankia and smaller rival Banca Civica SA, also preparing an IPO, to use share sales to shore up capital following the collapse of the country’s property boom. Marc Garrigasait, who helps oversee 600 million euros at the Barcelona-based asset-management firm Gesiuris SA, earlier predicted Bankia might have to lower its price range to attract shareholders.

“It does lift the chance that the bank may need to raise more capital in the future,” Garrigasait said yesterday.

The deal is Spain’s third-largest IPO in history. The bank originally planned to raise as much as 4.16 billion euros, or 0.46 times to 0.51 times its estimated book value, said two people with direct knowledge of the transaction.

Based on yesterday’s cut, the new ratio is about 0.39, according to data compiled by Bloomberg. The ratio for the average of eight listed Spanish banks was 0.68 as of July 15, Bloomberg data show.

Deal Metrics

Demand for the retail investors’ tranche of the IPO was 104 percent of the amount offered, the bank said. Demand for the institutional investors’ tranche covered 110 percent of the amount offered to them, the bank said. Bankia had allocated 60 percent of the sale to retail investors and 40 percent to institutional investors.

Five Spanish lenders failed this year’s European Union stress tests after regulators found they didn’t have enough capital to withstand a recession scenario. Bankia passed with a core Tier 1 capital ratio of 5.4 percent, just above the required 5 percent.

European bank stocks have sunk this year on concern balance sheets will suffer from rising bond yields in Greece, Italy and Spain. Spanish Finance Minister Elena Salgado warned that the government, already implementing the deepest budget cuts in three decades, may have to expand reductions planned for next year to avoid a Greece-like collapse in its debt market. Bankia, led by by former International Monetary Fund head Rodrigo Rato, has more than 280 billion euros of assets.

Civica IPO

Bank of America Corp., Deutsche Bank AG, JPMorgan Chase & Co. and UBS AG are managing Bankia’s IPO, along with Barclays Plc, BNP Paribas SA and Banco Santander SA, according to data compiled by Bloomberg.

Civica, formed from the combination of another four Spanish savings banks, is seeking to raise as much as 844 million euros in an IPO. The lender, also in Madrid, is priced at 0.4 times to 0.52 times its estimated book value, according to two people directly involved in the transaction. The bank decided to delay the pricing date by one day until today to see the result of Bankia’s IPO, said one of the people, who declined to be named because the process is private.

Successful IPOs for Bankia and Civica might help ease the pressure on Spain, which is toiling to cut the euro-region’s third-biggest budget deficit and rebuild confidence in the finance industry. Still, the offerings may have to be sold at “rock bottom valuations” to succeed, said Josef Schuster, founder of Chicago-based IPOX Schuster LLC, which oversees about $2.5 billion.

“It takes a lot of incentives to invest in Spanish IPOs at this juncture of debt crises in Europe,” Schuster said. “Financial IPOs are feeling the most heat.”

Spanish and Italian borrowing costs yesterday climbed to the highest since the start of the single currency. Moody’s Investors Service cut Ireland’s credit rating last week to junk and Fitch Ratings reduced Greece’s credit rating by three levels to the agency’s lowest grade for any country in the world.

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