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Spain's Bankia to create bad bank ahead of listing

Source: Reuters - Wed 6th Apr 2011

Newly formed Bankia, Spain's biggest savings bank, said late on Tuesday it would create a bad bank for doubtful assets such as repossessed land ahead of a stock market listing expected later this year.

Bankia, formed from the union of seven regional banks including heavyweight Caja Madrid, said it would seek a stock market listing with a net book value of 12 billion euros and assets totalling 270 billion euros.

Spain's second-biggest savings bank La Caixa said in January it would hive off its real estate assets into an unlisted company before reversing its banking business into its already listed Criteria unit.

Spain's savings banks, known as "cajas", have been given a deadline by the government to raise their solvency ratios to tough new minimum levels, either by getting private capital on board or accepting state funds.

Spain is under pressure to reassure markets on the solvency of its financial system, even more so after Moody's cut the credit ratings of seven banks in euro zone neighbour Portugal on Wednesday.

BBanco Financiero y de Ahorros (BFA) will be the unlisted unit of the Caja Madrid-led merger, including repossessed land and doubtful loans to real estate developers, Bankia said.


Caja Mediterraneo (CAM), a savings bank based on Spain's eastern Mediterranean coast, said on Friday it would seek 2.8 billion euros in state aid after a merger with three other banks fell through.

Bigger Spanish banks are looking at buying CAM's branch network and deposits, but they don't want the real estate assets on the bank's balance sheet. CAM is based in one of the areas worst hit by Spain's property crash.

Spain's second-biggest bank BBVA said on Tuesday price was an issue.

"Like everything in life, it depends on price," said Chief Executive Angel Cano on the sidelines of a conference in Madrid when asked if the bank was interested in CAM.

Ibercaja, one of the more healthy cajas tipped to be looking at a deal with CAM, said on Wednesday it would look at every opportunity but would most likely end up going it alone.

"The future of the caja will probably be ... to continue alone," managing director Jose Luis Aguirre told journalists.

The Bank of Spain is currently studying banks' plans to raise capital to the new minimum solvency ratios and will deliver an opinion on April 14.

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