Spain to Recoup Bailout Funds With Merger of Rescued Banks

Bankia and BMN merger

Spain will seek to merge Banco Mare Nostrum SA and Bankia SA, two lenders nationalized in the fallout from the country’s property bust, and sell shares in the combined bank to recoup their bailout costs.

The government’s bank-rescue fund recommended the strategy in a regulatory filing Wednesday after examining various options for recovering public aid. It estimates the merger will bring in 400 million euros ($425 million) more for the FROB than selling stakes in separate banks.

Spain turned to the European Union in 2012 for 41 billion euros to prop up its lenders. Their mounting real estate losses were undermining confidence in the country’s government bonds, aggravating the region’s sovereign debt crisis.

The two banks said they will investigate the proposal, which would need to be approved by their shareholders. Bankia received 22 billion euros of state aid during Spain’s banking crisis while BMN received 1.65 billion euros.

Bankia’s shares rose 3.6 percent to 1.06 euros at 11:06 a.m. in Madrid trading, the largest gainer in the benchmark IBEX 35 Index. BMN isn’t publicly traded.

‘Makes Sense’

“The deal makes sense as both banks are complementary in terms of their geographic presence and BMN has good efficiency and capital ratios,” Renta 4 banking analyst Nuria Alvarez said by phone. “The key of the deal remains to be seen though, and it’s the price Bankia will pay for BMN.”

Spain’s 65 percent stake in BMN was valued in an eventual sale at 690 million euros by AFI, Consultores de las Administraciones Públicas SA, an adviser hired by FROB to study options for the banks, the fund said in the filing.

BMN had 41 billion euros of assets in June, according to data compiled by Bloomberg. Merging it with Bankia, Spain’s fifth-biggest lender, would create a bank with assets of more than 230 billion euros.

Spain currently owns 66 percent of Bankia after selling a 7.5 percent stake in 2014. Taxpayers have so far recovered 1.8 billion euros from dividends and the sale of the stake.

BMN, formed from the merger of three savings banks, was nationalized in 2013 and given 730 million euros of capital in return for commitments to reduce its size and sell assets in preparation for a share offering before 2018.


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