Spain's Bankia to explain call for 19bn-euro bailout

[geoff01]

The board of debt-ridden Spanish bank Bankia is expected to explain why it needs 19bn euros' worth ($24bn; £15bn) of loans from the government.

Executives have called a news conference for Saturday in which they are to outline a restructuring plan after the bank restated its 2011 figures, admitting massive losses.

Trading in shares in Bankia - Spain's fourth-largest bank - were suspended by the Madrid stockmarket on Friday.

Bankia is already part-nationalised.

Europe is watching the banking sector in the region closely amid the economic crisis.

Spanish banks, which lent heavily during the property bubble, are seen as particularly shaky as they now hold massive amounts of soured investments.

Correspondents say the bailout of Bankia would be the biggest of its kind in Spanish history.

http://www.bbc.co.uk/news/world-europe-18216793

[Barron]

Originally Posted by geoff01

The board of debt-ridden Spanish bank Bankia is expected to explain why it needs 19bn euros' worth ($24bn; £15bn) of loans from the government.

Executives have called a news conference for Saturday in which they are to outline a restructuring plan after the bank restated its 2011 figures, admitting massive losses.

Trading in shares in Bankia - Spain's fourth-largest bank - were suspended by the Madrid stockmarket on Friday.

Bankia is already part-nationalised.

Europe is watching the banking sector in the region closely amid the economic crisis.

Spanish banks, which lent heavily during the property bubble, are seen as particularly shaky as they now hold massive amounts of soured investments.

Correspondents say the bailout of Bankia would be the biggest of its kind in Spanish history.

http://www.bbc.co.uk/news/world-europe-18216793

It may be that an idea that was floated a while ago may gain new acceptance in the very near future. It called for a two Euro system, with a lower value Euro brought in for the Southern European Countries,

Best Regards

[Barron]

Spain pressured as market weighs Bankia fallout

MADRID — Bankia SA shares recovered some of a nearly 30% drop on Monday, but stayed significantly lower as markets got the first chance to react to news of a bigger-than-expected bailout need for the troubled lender and mulled the broader implications for the euro-zone crisis.

Shares of Bankia /quotes/zigman/5907705 ES:BKIA -6.25% , which had been suspended Friday ahead of that bailout news and took several minutes to begin trading on Monday, sank to an all-time low of €1.11 at one point, but ended off 13% to €1.36, according to FactSet Research.

On Friday, Bankia said it would need to ask the government for a bailout of €19 billion (around $24 billion), a figure that exceeded some estimates calling for a recapitalization of around €15 billion. The bank, formed of a merger of several savings banks, is a casualty of the collapse of Spain’s housing market that triggered a recession and ignited another leg of the sovereign-debt crisis.

The future of the European economy and the very real possibility of the U.S. economy being pulled back into recession are weighing on sentiment.

The IBEX 35 index /quotes/zigman/2759620 XX:IBEX -1.39% fell 2.2% to 6,401.20. Losses for Spain chipped away at a rally for the rest of Europe, which had gained on a weekend poll that showed Greece’s pro-austerity party taking a lead ahead of next month’s elections. Europe stocks rise after Greek polls

The yield on Spain’s 10-year government bond

/quotes/zigman/4869131/delayed ES:10YR_ESP -0.19% shot up 16 basis points to 6.45%, according to FactSet Research, while the cost of buying protection against a Spanish default reportedly hit a record on Monday. A level of 7% triggered bailouts for both Ireland and Greece.

“Investors simply started looking at the figures,” said Predrag Dukic, senior equity sales trader at CM Capital Markets. “€23.4 billion for a ‘solvent’ bank is a lot. On top of that, the rumors of an additional €30 to €35 billion for other, smaller banks such as Catalunya Caixa, [Novagalicia] and Banco de Valencia, are not helping the market sentiment either.”

The figure of €23.4 billion refers to the €19 billion bailout, plus additional government equity that has already been injected into Bankia. It was just two weeks ago that Bankia plunged on rumors investors were pulling funds out of the lender, triggering bank and government officials to respond that the lender was solvent and its funding problems had been resolved.

In a televised news conference on Monday, Spanish Prime Minister Mariano Rajoy repeated that there would be no funds sought from Europe to rescue Spanish banks.

Analysts also noted speculation that of three more banks to be rescued — as reported in the Spanish newspaper El Mundo on Monday — Rajoy reportedly said the government would “act when needed.” All three banks — Banco de Valencia, Novagalicia and Catalunya Caixa — have already been nationalized.

Weighing as well were downgrades to junk ratings for Bankia, Banco Popular SA /quotes/zigman/382819 ES:POP -3.21% and Bankinter SA /quotes/zigman/473086 ES:BKT -0.39% by Standard & Poor’s Ratings Services, which came just ahead of the Bankia announcement last Friday. S&P cited concerns about the stability of the country’s banking system. Banco Popular fell 7.5% and Bankinter fell 4.3%.

Banking stalwarts Banco Santander SA /quotes/zigman/205160 ES:SAN -2.34% /quotes/zigman/188106/quotes/nls/std STD -0.18% and BBVA SA /quotes/zigman/226886 ES:BBVA -1.66% /quotes/zigman/254684/quotes/nls/bbva BBVA -0.97% also bowed to pressure, off 3.2% and 3.4%, respectively.
Target-price cuts

Analysts took a red pen to their Bankia target price on Monday. Nomura slashed its target to €0.2 from €1.1 a share, saying recapitalization needs for Spain’s listed and other nationalized banks could reach €50 billion to €60 billion. The government commissioned an independent audit of Spanish banks, due to be completed in mid-June.

“Grotesque, unbelievable, bizarre and unprecedented — G.U.B.U. — a familiar acronym used in Ireland, could be applied in this case,” said the analysts in a note, in reference to the Irish bank bailouts that took place in 2010.

[geoff01]

The crazy thing is that some of these banks will possibly never recoup their losses so could be sucking in 'loans' for a long time to come.

Is it better just to let them go under, like most other businesses would have to do?

[geoff01]

Spain struggles to prop up ailing lender Bankia as ECB rejects ***8364;19billion 'backdoor bailout' plan

By Daily Mail Reporter

PUBLISHED: 08:43, 30 May 2012 | UPDATED: 08:43, 30 May 2012

Spain's plan to recapitalise its troubled lender Bankia through a ***8364;19billion 'backdoor bailout' has been rejected as 'unacceptable' by European banking officials.

Madrid said it wanted to inject the amount in sovereign bonds into the bank's parent firm, and then swap it for cash at the European Central Bank's three-month refinancing window.

This would, it said, avoid the need to raise the money on bond markets.

But the ECB said a proper capital injection was needed for the country's fourth largest banking institution, reports the Financial Times.

Read more: http://www.dailymail.co.uk/news/arti...#ixzz1wL7rvn1t

[Barron]

Originally Posted by geoff01

The crazy thing is that some of these banks will possibly never recoup their losses so could be sucking in 'loans' for a long time to come.

Is it better just to let them go under, like most other businesses would have to do?

IMO, it's never an advantage to let a major institution go under but if the current structure isn't working a new financial structure for Southern European Countries may be the best way to go.

It may even involve a new Euro pegged differently than the current one being used?

Best Regards

[datamonkey]

This is exactly what Spain doesn't need right now. Record unemployment levels recently been announced too.

I think maybe enough is enough and it's time for letting some of these institutions go under. As they know they will eventually get bailed out they are too cavalier in their actions and look whats happened to the world economy. Time they learnt a lesson and realized they are not protected at any costs...