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Bad debts rise at Spain's newly listed Bankia

Source: Reuters - Wed 27th Jul 2011

Newly listed Spanish savings bank Bankia said its ratio of bad debts rose in the first half from the December figure and would continue to rise in the sector into next year.

Its proportion of non-performing loans rose to 6.35% from 5.52% in the 6 months, some way worse than the 4.81% recorded for domestic loans by bigger local rival Santander , which also posted results on Wednesday.

The country's savings banks' asset quality has suffered a greater deterioration than their commercial banking peers due to their bigger exposure to Spain's sickly property sector.

One of Bankia's main priorities is to reduce the level of bad debts, its chief executive officer said, though Spain's banking sector is far from out of the woods yet.

"Bad loans for the sector as a whole will continue to rise into the first quarter of 2012," CEO Francisco Verdu told a news conference.

Bankia reported net profit of 205 million euros. The bank, formed from the merger of seven regional lenders, including giant Caja Madrid, did not provide year-ago figures. But the figure compared with profit of 195 million euros at Caja Madrid alone this time last year.

Bankia's integration plan, focused on cost cutting through branch closures and staff lay-offs, is ahead of the 2012 target, and synergies should be reflected in the accounts from the second half of this year, Verdu said.

Strict cost control will remain a priority for the bank, and it will embark on another review of its branch network and staffing levels early in 2012.

Bankia shares were down 1.36% at 3.64 euros at 1154 GMT, in line with a 1.4% drop on Spain's blue-chip IBEX index .


Bankia raised 3.1 billion euros last week when it priced its initial public offering (IPO) at 3.75 euros a share, slashing the price at the last minute to attract anxious investors deterred by the euro zone debt crisis.

Bankia drove through an IPO despite adverse markets as part of government-driven measures to increase solvency ratios and reassure global markets about the stability of Spain's financial system.

A substantial part of Bankia's share offer was bought up by retail investors and Spanish institutions, but since its market debut some overseas investment funds have bought in, including one U.S. fund and several European funds, Verdu said.

Some of these investors have shares in other Spanish banks.

The savings bank passed European Union-wide stress tests earlier this month, but only by including proceeds from the share offerings in advance of their conclusion.

Five of the eight banks that failed European stress tests were Spanish.

Core capital at Bankia rose to 9.9% after its initial public offering from 8% at the end of June.

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