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Spain's Caja Madrid merger relaunches as Bankia

Source: Reuters - Thu 3rd Mar 2011

Spain's biggest savings bank by assets, the Caja Madrid-led merger of seven lenders, relaunched under the name Bankia on Wednesday in the latest step of Spain's banking overhaul.

Bankia is planning a stock market listing, like rival CaixaBank, over the next few weeks. The bank needs around 2 billion euros to reach the government minimum of 8% core capital, financial sources estimate.

"It's desirable to have flexibility for listing plans, but once you've taken the decision it's desirable to float on the stock exchange as soon as possible," Chairman Rodrigo Rato told reporters at a launch of the lime green and brown Bankia logo.

Spain's small banks and unlisted savings banks are jostling to have plans to raise capital in place before March 10, when the Bank of Spain will publish lenders' capital needs. Banks failing to meet the minimum capital reserves must show plans to raise funds such as seeking a stock market listing or selling assets. Those who do not comply with minimum reserves by next March face nationalisation.

Banco Pastor, Spain's smallest listed bank, said on Wednesday it is issuing 252 million euros in convertible bonds to boost its capital reserves under tough new government guidelines.


Banco Pastor, which has one of the highest exposures to real estate among Spanish banks, said the convertibles would pay a coupon of 8.25% and mature in April 2014. Its shares were down 1.9% at 3.6 euros at 1347 GMT.

The Galicia-based bank had a core capital ratio of 8.43% at the end of 2010, above the new government minimum for listed lenders. Pastor said last month it was open to studying possible mergers with savings banks.

Separately, two regional savings banks Caja Espana-Duero and Banco Mare Nostrum said they were in talks about a possible merger, which would be the first of a second round of mergers within the unlisted banks, or cajas.

Together the banks make up around 4% of the Spanish banking system.

A government-driven round of consolidation last year brought the number of cajas down to 17 from 45. Some economists believe further consolidation will cut their number to around a dozen.

"It seems inevitable that we are going towards an environment with larger size entities, in order to compete more efficiently in the markets," said Bankia's Rato on Wednesday.

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