Spain Starts Sale of Bankia to Recoup Bailout Funding

Spain sold 7.5 percent of Bankia SA as it started recovering 22.4 billion euros ($30.7 billion) of funds provided to recapitalize a bank whose near-collapse pushed the country into a European Union bailout.

Bankia’s government-owned parent BFA sold 863.8 million shares at 1.51 euros apiece to raise 1.3 billion euros, Madrid-based BFA said in an e-mailed statement today. It made a net gain of 301 million euros.

Real-estate losses at Spain’s fourth-biggest bank prompted the government to request a 41 billion-euro bailout from the EU in 2012, as investor concern mounted that the burden of salvaging Bankia and other former savings banks would overwhelm government finances. The group earlier this month posted a profit of 818 million euros for last year after a 21.2 billion-euro loss in 2012.

“Investors are taking the view that Bankia has made the adjustment it needs and they trust in its management,” Alvaro Cuervo, director of the University College of Financial Studies in Madrid, said by telephone today. “It’s a positive judgment.”

Bankia fell as much as 6.2 percent in Madrid and closed at 1.52 euros, a decline of 3.7 percent. The shares have still jumped 23 percent this year, valuing the lender at 17.5 billion euros.

Spain picked Goldman Sachs Group Inc. to advise on the sale of Bankia earlier this month. UBS AG, Deutsche Bank AG and Morgan Stanley were also hired for today’s share sale. The sale attracted investor offers worth 2.5 billion euros, BFA said said.

State Control

The government controls about 68 percent of Bankia through its bank rescue fund, known as FROB, which owns all the parent BFA. BFA injected 10.6 billion euros into Bankia last May at 1.35 euros per share.

The sale is “really one of the signs that there has been a change in the perception and the reality of the financial system,” Spanish Economy Minister Luis de Guindos said in a speech in Madrid yesterday.

Bankia Chairman Jose Ignacio Goirigolzarri said this month that the process of privatizing the lender would probably take at least two years. He said he didn’t think that it was impossible to recover all the taxpayer aid.

Goirigolzarri, a former second-in-command at Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, is cutting costs and making higher-yielding loans to companies as he targets return on equity, a measure of profitability, of 10 percent next year. Based on that outlook, Bankia could start paying dividends for 2014 in 2015, Goirigolzarri said.