MADRID — Shares in Bankia, the giant Spanish mortgage lender that was at the heart of the country’s banking crisis, fell sharply on Tuesday after a large share issue that was meant to herald a new start.
Bankia closed down 5 percent at 57 euro cents a share. They had fallen as much as 21 percent at the start of trading session, when about 11.5 billion new Bankia shares were issued as part of a 15.5 billion-euro ($20 billion) recapitalization plan. Before the new-share sale, only about 20 million Bankia shares were trading.
The bank’s stock had already fallen over 50 percent last week, when institutional shareholders sold amid concerns about the flood of new shares and Bankia’s ability to return to profits as swiftly.
On Tuesday, many retail investors offloaded the new shares that they had received in exchange for swapping at a discount of 70 percent from their preferred shares, a form of convertible debt that recently led to litigation and street protests against Bankia and other Spanish banks.
The preferred shares were sold by Bankia and other banks to their retail clients when Spain was caught up in the euro debt crisis but not yet facing a full-fledged banking collapse.
That came in May 2012, when Bankia revealed extensive losses on its mortgage portfolio that forced the government to seize control of the bank, replace its management and negotiate a European banking bailout.
Over all, Spain allocated to Bankia about 18 billion euros of the 40 billion euros of European bailout money that it has received. Spain’s bank restructuring fund now owns about 68 percent of Bankia’s equity, while the rest is in free float, of which over a quarter is owned by institutional investors.
Bankia’s share price decline came as the Spanish stock market enjoyed an otherwise positive day, with the benchmark Ibex index rising 1.8 percent on Tuesday.
Bankia shares are expected to decline further as the latest price remains above the target price set by investment banks. Most analysts recently estimated Bankia’s book value at far below the book value of 1 euro a share that was made as part of the latest recapitalization.
And even though Bankia’s new management has promised a swift return to profits, credit rating agencies have warned that the bank would remain dependent on financing from the European Central Bank for the foreseeable future.
“The previous prices were irrational, and today’s level is a lot more reasonable,” said Daragh Quinn, a banking analyst at Nomura in London, commenting on Tuesday’s drop. Nomura has a price target of 40 euro cents a share for Bankia, so that there is a possibility of “further downside,” Mr. Quinn added.
While the sale of risky preferred shares to retail clients has proved among the most controversial aspects of Spain’s banking crisis, Bankia is the object of several other lawsuits.
The former management of Bankia, led by Rodrigo Rato, is being sued over allegations of misstating the bank’s accounts ahead of an initial public offering in 2011.
As part of a separate case, Mr. Rato’s predecessor as executive chairman, Miguel Blesa, spent a night in jail this month, before posting bail. Mr. Blesa stands accused of leaving his bank saddled with huge losses because of the takeover of a bank based in Miami in 2008.
nytimes.com
Bankia closed down 5 percent at 57 euro cents a share. They had fallen as much as 21 percent at the start of trading session, when about 11.5 billion new Bankia shares were issued as part of a 15.5 billion-euro ($20 billion) recapitalization plan. Before the new-share sale, only about 20 million Bankia shares were trading.
The bank’s stock had already fallen over 50 percent last week, when institutional shareholders sold amid concerns about the flood of new shares and Bankia’s ability to return to profits as swiftly.
On Tuesday, many retail investors offloaded the new shares that they had received in exchange for swapping at a discount of 70 percent from their preferred shares, a form of convertible debt that recently led to litigation and street protests against Bankia and other Spanish banks.
The preferred shares were sold by Bankia and other banks to their retail clients when Spain was caught up in the euro debt crisis but not yet facing a full-fledged banking collapse.
That came in May 2012, when Bankia revealed extensive losses on its mortgage portfolio that forced the government to seize control of the bank, replace its management and negotiate a European banking bailout.
Over all, Spain allocated to Bankia about 18 billion euros of the 40 billion euros of European bailout money that it has received. Spain’s bank restructuring fund now owns about 68 percent of Bankia’s equity, while the rest is in free float, of which over a quarter is owned by institutional investors.
Bankia’s share price decline came as the Spanish stock market enjoyed an otherwise positive day, with the benchmark Ibex index rising 1.8 percent on Tuesday.
Bankia shares are expected to decline further as the latest price remains above the target price set by investment banks. Most analysts recently estimated Bankia’s book value at far below the book value of 1 euro a share that was made as part of the latest recapitalization.
And even though Bankia’s new management has promised a swift return to profits, credit rating agencies have warned that the bank would remain dependent on financing from the European Central Bank for the foreseeable future.
“The previous prices were irrational, and today’s level is a lot more reasonable,” said Daragh Quinn, a banking analyst at Nomura in London, commenting on Tuesday’s drop. Nomura has a price target of 40 euro cents a share for Bankia, so that there is a possibility of “further downside,” Mr. Quinn added.
While the sale of risky preferred shares to retail clients has proved among the most controversial aspects of Spain’s banking crisis, Bankia is the object of several other lawsuits.
The former management of Bankia, led by Rodrigo Rato, is being sued over allegations of misstating the bank’s accounts ahead of an initial public offering in 2011.
As part of a separate case, Mr. Rato’s predecessor as executive chairman, Miguel Blesa, spent a night in jail this month, before posting bail. Mr. Blesa stands accused of leaving his bank saddled with huge losses because of the takeover of a bank based in Miami in 2008.
nytimes.com
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