Bankia Chairman ‘Deeply Regrets’ Losses, Pledges Turnaround

The new chairman of the Bankia group, sunk by souring real-estate assets that led it to be nationalized by the Spanish government, told shareholders he “profoundly” regretted their losses and pledged to turn around the business.

Bankia will seek to reduce its 60 billion euros ($75 billion) of non-yielding assets by more than half over three years and improve its cost-to-income ratio to 40 percent from almost 60 percent over the same period, Jose Ignacio Goirigolzarri said today in a speech to shareholders in Valencia, Spain. Police stood by as customers and employees protested outside and some shareholders inside the hall shouted “out, out” as he spoke.

“I am also conscious of the losses that you have had in your investments in Bankia in recent months, and I profoundly regret them,” Goirigolzarri said. “Our objective is that at the end of the next three years, Bankia, the company of which you are owners, will achieve a return on equity that’s in line with the average of the best competitors of the Spanish financial system.”

The government took over Spain’s third-biggest banking group last month after the International Monetary Fund called for action to strengthen its balance sheet and management as losses linked to real estate mounted.

Angry Shareholders

The group’s publicly traded bank, Bankia SA, raised more than 3 billion euros with a sale of shares last July that left shareholders, including many of its own customers, with losses of more than 75 percent. The government completed its takeover of 100 percent of the group’s parent company this week after a valuation showed it had a negative value of 13.6 billion euros.

On May 25, Goirigolzarri requested 19 billion euros from the government to clean up the company.

“I can assure you that if we are seeking this capital injection, it’s because we believe we will be capable of generating value for all of you in the medium term,” he told shareholders today.

Investors lined up to take the microphone during a question-and-answer session to criticize the previous management of the lender, formed in 2010 from the merger of seven savings banks, led by Caja Madrid and Bancaja. Former Chairman Rodrigo Rato, an ex-managing director of the IMF, resigned on May 7.

“I’m here to represent my mother who is 81 years old and has had a heart operation and a pacemaker fitted,” shareholder Mercedes Perez Rodriguez told the meeting. “She has everything except money because you’ve taken it all.”

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