Shares in Spain’s fourth-largest lender, Bankia, fell to a record low yesterday following reports that it is about to be revalued far below its current market price.

Shares in the bank, which was part-nationalised last year amid a financial sector crisis, lost 18 per cent of their value during the day’s trading on the stock market. At close they were each worth €0.33, their lowest since Bankia was listed in the summer of 2011, at €3.75 per share.

Heavy losses

This was the second consecutive day of heavy losses for Bankia, following a drop of 12 per cent on Thursday. Trading in the bank was delayed that day after financial newspaper Expansión had reported that the FROB financial restructuring fund was going to revise the nominal value of Bankia shares down to €0.01 each, from €2.0 currently.

Although the FROB denied the report, insisting that the re-valuation had not been completed, it acknowledged that shareholders faced a “significant reduction” of the current stock value. The FROB has subscribed to nearly €11 billion in convertible bonds via Bankia’s parent company BFA, giving it a 100-per cent holding. The price of the conversion is yet to be decided and the government has said it will be announced in the coming weeks. The government’s handling of Bankia’s problems has come under scrutiny this week, with former Bank of Spain governor Miguel Ángel Fernández Ordóñez blaming the administration for causing him to “utterly lose control” of the lender last year.

Yesterday, economy minister Luis de Guindos shrugged off the accusation and was upbeat about the banking industry. “Our financial system is much more solid and more solvent than that which we had a year ago and that is one of the foundations of hope for the recovery of the Spanish economy,” he said while in Moscow for the G20 summit.

Financial rescue

The result of a merger of several regional savings banks, Bankia has been the biggest beneficiary of a €40 billion EU financial rescue, which Spain requested last year as the scale of the sector’s exposure to toxic real estate assets became clear.