Bankia suffers biggest ever loss by Spanish bank

 

Nationalized bank Bankia has suffered the biggest loss ever posted by a Spanish lender as a result of its ill-fated exposure to the troubled real estate sector.

Bankia was in debt by €7.053 billion euros in the first nine months of the year and posted a loss in the third quarter alone of €2.605 billion as a result of provisions to cover losses from toxic property assets.

The lender said asset impairments cost it €11.485 billion in the period, and has now covered 75% of the provisions for real estate assets required by the Bank of Spain in 2 decrees approved earlier this year.

Loans to the private sector declined 11.9% to €139.584 billion, while client resources in the shape of deposits fell 25.1%. Deposits alone fell €14.257 billion from the end of September to €98.793 billion as clients lost faith in the lender. As a result its share of the deposit market in Spain dropped from 10.4% to 9.4% in August.

Nevertheless, the bank made an operating profit in the period of €306 million before provisions, largely the result of net interest income of €744 million and commissions of €226.

Yesterday the Bank of Spain ordered the 72 Bankia Executives who were awarded bonus payments for 2011 to repay the amount recieved in full.