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Spanish lender Bankia fell below a sharply discounted offering price in its market debut on Wednesday, while the country's banking sector bounced on relief the listing was done despite brutal market conditions.
The initial public offering (IPO) of Bankia, Spain's biggest savings bank, was seen as a critical step in Spain's overhaul of its financial system after the government forced unlisted regional banks to seek private capital or face nationalization.
Bankia's shares fell around 2% to 3.7 euros, valuing the bank at around 6.3 billion euros. Yet Spanish banks rose 4 percent on relief the IPO went ahead.
"It's triggered some euphoria among the other banks because its flotation was considered a challenge for the entire Spanish financial system," said Enrique Quemada, chief executive of consultancy One to One Capital Partners.
Bankia, formed from the merger of seven regional banks, raised 3.1 billion euros on Monday when it slashed its IPO price to 3.75 euros at the 11th hour to attract investors amid a spiraling euro zone debt crisis.
Bankia Chairman Rodrigo Rato noted the offering had defied a backdrop of high tension in global markets as euro zone leaders thrashed out a second rescue package for Greece. Spain's borrowing costs have soared to euro-era highs in recent days.
TOUGH CONDITIONS
"We've done it in the middle of a real storm in the market, created by some of the toughest financial conditions of the last decade," Rato said, toasting the debut with champagne in a Madrid stock exchange decked out in Bankia's lime green and brown logo.
Bankia got its flotation off the ground by leaning heavily on Spanish investors. Retail investors, bombarded by an intense TV and radio advertising campaign, accounted for 60% of the issue.
Around 80% of the institutional tranche were domestic investors, a source said. Bankia declined to break down the investor base by region.
"It would have been a lot better to see international investors but there has been very little interest outside Spain," said Neil Smith, banking analyst at WestLB.
"Nevertheless it was a sterling effort to do a Spanish bank IPO in the conditions they were facing."
The IPO pricing valued Spain's biggest savings bank by assets at 0.4 times book value, cheaper than other mid-sized domestic Spanish banks such as Popular, which are trading around a 0.6 multiple.
Rival Banca Civica priced its own IPO at the low end of an indicated range late on Tuesday and reduced the institutional tranche of its offer due to sluggish demand.
Trading in Banca Civica shares, around a quarter of the size of Bankia, will start on Thursday.
Banca Civica and Bankia passed European Union-wide stress tests last Friday, but only by including proceeds from the share offerings. 5 of 8 banks that failed were Spanish.