Bankia will set aside a total of €3.4bn in provisions to achieve new Spanish government rules forcing lenders to recognise property losses, and said it had no need to take state aid or seek a merger to survive.
Spain’s third-largest bank by assets, which was formed through a merger of seven regional savings banks and floated on the stock market last year, said it had set aside €1.239bn of the total, meaning an extra €2.26bn in provisions would be raised over the rest of this year.
“Bankia is not a systemic problem,” said Rodrigo Rato, the banks’ executive chairman, arguing that the provisions showed the lender’s progress in the “immense restructuring work to complete the most important merger in the European financial system”.
As part of the provisioning effort Bankia will dilute existing investors by 26 per cent by issuing new shares to exchange for €831m of preference shares and €445m of subordinated debt held issued by its “bad bank” parent BFA, which has majority control over Bankia.
The future of the former savings bank, which was built around a merger of Caja Madrid and Bancaja among others, has been subject to near constant speculation after the recently installed Spanish government began to pressure the country’s banks to begin a new round of consolidation.
Mr Rato denied that Bankia was under pressure to find a partner, nor that any negotiations had taken place with the Catalan savings bank La Caixa, citing comments from the latter’s management team denying repeated press reports that the two banks had met for informal talks about a tie up.
Reporting its maiden full-year results after raising just over €3bn in its summer stock market listing Bankia said net profit for the year fell 13 per cent to €309m, while net interest income, which measures the spread between what a bank borrows and lends at, fell 15 per cent annually to €2.7bn.
As a result of sharply higher provisioning in the fourth quarter, Bankia made a pre-tax loss for the period of €21m, but managed to report a net profit of €13m for the last three months of the year because of its treatment of taxes and minority contributions.
Bad loans rose to 7.63 per cent as a proportion of all loans, up from 7.09 in September, with the amount these are covered by provisions remaining stable at about 30 per cent.
Bankia said that as a result of cost savings and staff reductions after the merger of its component cajas, it had reduced operating expenses over the year by 16 per cent, as part of a strategic plan to improve efficiency over the next four years.