By Jonathan House
MADRID (MarketWatch) — Spain’s bank bailout fund Thursday warned of significant losses for Bankia SA shareholders as part of the European Union-financed cleanup of the nationalized lender.
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In response to a report in Spanish newspaper Expansion that the restructuring would require a reduction in the nominal value of the bank’s shares ES:BKIA -12.39% to 0.01 ($0.013) from 2, the bailout fund known as the FROB said it was yet to complete the necessary valuation exercise of the ailing lender.
However, the FROB noted that it has already said Bankia has a negative value of €4.15 billion, which points to a “significant reduction in the nominal value of its shares” in the restructuring exercise.
Spain’s stock-market regulator briefly suspended trading in Bankia shares following the Expansion report.
EU rules require a company receiving state aid to force shareholders to assume a large part of its losses.
Spain has received €38.87 billion in EU aid to help cleanup its banking sector, which is suffering from the collapse of a decade-long housing boom.
The bulk of that is going to nationalized lenders Bankia, Banco de Valencia SA, Catalunya Caixa and NCG Banco. So far, the FROB has only completed the valuation of Banco de Valencia.
