DealBook: Bankia Stock Value Is Nearly Wiped Out Under Recapitalization Plan

Juan Medina/ReutersBankia’s chairman, Jose Ignacio Goirigolzarri.

MADRID — Shares in Bankia, the giant Spanish mortgage lender whose collapse last year led to a banking crisis in Spain, slumped Monday in the first day of trading after regulators wiped out most of the stock’s value.

The shares closed at 14.7 euro cents, down 41 percent from the close on Friday.

Regulators said Friday that Bankia shares would be revalued at 1 cent each, as the custodial managers who now oversee the bank try to create a clean slate. The new valuation was a condition of Bankia’s getting a capital injection of 10.7 billion euros ($13.9 billion) from European rescue funds.

The action is the latest blow to the tens of thousands of the bank’s consumer clients who bought into the initial public offering two years ago, when Bankia was valued at 3.75 euros a share.

Standard Poor’s lowered Bankia’s rating by one notch, to BB-, which is three rungs below investment grade. The ratings agency said the bank was likely to remain dependent on funding from the European Central Bank for the time being. It also said the cut was justified because the positive impact of Bankia’s plans to increase its capital by converting 6.5 billion euros of hybrid debt into equity ‘‘will not be as great as we previously expected.’’

In February, Bankia reported a loss of 19.2 billion euros for last year, a record for the Spanish banking industry. But it forecast a swift return to profit after the bailout and the cleaning up of its balance sheet.

Article source: http://dealbook.nytimes.com/2013/03/25/bankia-stock-value-is-nearly-wiped-out-under-recapitalization-plan/?partner=rss&emc=rss