(Updates with analyst comment from seventh paragraph.)
Feb. 28 (Bloomberg) -- BFA-Bankia Chairman Jose Ignacio Goirigolzarri said a balance sheet clean-up that inflicted a 21.2 billion-euro ($27.6 billion) after-tax loss last year will set the Spanish banking group on course to return state aid.
“We have the possibility of returning the aid and the obligation and the commitment to do so, or, even better, to make this investment profitable,” Goirigolzarri said at a news conference in Madrid today. “I would like to make very clear that this very solid financial position means that our customers can be absolutely calm because we have an extraordinarily solvent company.”
Spain has so far taken about 40 billion euros in European bailout funds for lenders after concerns that mounting losses at Bankia, crafted from a merger of seven savings banks, would overwhelm public finances. After the Bankia group took 18 billion euros in state aid, Goirigolzarri is targeting earnings of 1.2 billion euros in 2015 as he shifts soured real estate to Spain’s new bad bank, sheds about 6,000 employees and closes 39 percent of its branches.
Bankia’s record after-tax loss last year was more than four times the 4.95 billion-euro loss in 2011, according to earnings reported today. The firm booked 26.8 billion euros in provisioning charges in 2012 as its listed Bankia SA unit posted a net loss of 19 billion euros, compared with a loss of 2.98 billion euros in 2011.
Bankia fell 3.3 percent to 29.1 cents by 3:49 p.m. in Madrid trading, bringing the decline over the past 12 months to 90 percent.
“Bankia runs a significant retail machine in Spain but these are still very early days,” said Carlos Joaquim Peixoto, a bank analyst at Banco BPI SA in Oporto, Portugal, in a phone interview. “Mortgages and SME lending will continue to deteriorate in this economic environment and that remains a concern.”
After a “turbulent” period from May to October last year, Bankia has stabilized its deposit base and market share, Goirigolzarri said. The bank is targeting profit of 800 million euros this year, and plans to create conditions that would permit the state to start reducing its investment by 2015.
Bankia’s client deposits were 98.5 billion euros in December, compared with 98.6 billion euros three months earlier and 113 billion euros a year earlier, the lender said. Lending fell 27 percent last year to 134 billion euros as net interest income rose 13 percent to 3.1 billion euros.
Bad loans as a proportion of total loans stood at 13 percent in December compared with 13.3 percent in September and 7.6 percent at the end of 2011, the bank said. The lender had a stock of 19 billion euros of refinanced loans at the end of 2012, said Bankia’s General Director Jose Sevilla at today’s news conference.
The group is still waiting for Spain’s bank rescue fund to announce the final terms of the exchange of hybrid debt securities for shares in the last stage of the recapitalization. The fund, known as FROB, is scheduled to announce the terms in March, Goirigolzarri said.
El Pais newspaper reported today that the FROB and Bank of Spain expect the European Commission to fix a value for the shares of one cent. It’ll be difficult for investors to assess opportunities at Bankia until the final terms of the exchange are known, said Peixoto.
The after-tax loss would have been 19.4 billion euros taking into account gains from the exchange of hybrid debt instruments, based on pro forma numbers, the group said.
--Editors: Mark Bentley, Frank Connelly