Market Commentary and Intraday News
Trading in Bankia shares halted pending aid demand
363 days ago
By CIARAN GILES
(AP:MADRID) Spain's market regulator suspended trading of shares in bailed-out Bankia on Friday ahead of a key board meeting at which the lender is expected to decide how much more rescue money it needs from the government.
A market commission statement said trading was being halted because "a concurrence of issues could affect the normal exchange of the bank's shares." Bankia's board meeting will start in the early afternoon, but details will be announced only on Saturday, the company said.
Spanish banks were heavily exposed to the country's burst real estate bubble and now hold massive amounts of soured investments, such as defaulted mortgage loans or devalued property. Bankia, Spain's fourth largest bank, has been the worst-hit and holds (EURO)32 billion ($40 billion) in such toxic assets.
Bankia was created from the merger of seven regional banks, or cajas, that were deemed too weak to stand alone. But financial concerns have continued to plague it _ the price of its shares has fallen more than 50 since they went public last July. The government decided to intervene earlier this month, effectively nationalizing it. Bankia shares had closed at (EURO)1.6 ($2.01) on Thursday after shedding more than 7 percent.
Economy Minister Luis de Guindos said Wednesday the government would pump at least (EURO)9 billion ($11 billion) into Bankia but added that more would be available if needed. Spanish newspapers quoted unnamed market sources as saying the bank will likely ask for up to (EURO)15 billion ($19 billion). Neither the bank nor the Economy Ministry would comment on the reports.
The government is trying to shore up the banking sector to get credit flowing to the ailing economy. But the cost of rescuing banks could overwhelm government finances, which are strained by a recession and an unemployment rate of nearly 25 percent. The possibility that the Spanish government might eventually need an international rescue package _ like the ones Greece, Ireland and Portugal sought _ has kept investors on edge for months.
Those uncertainties have sent Spain's borrowing costs soaring to levels that Prime Minister Mariano Rajoy said Spain could not put up with for very long.
On Friday, the yield for key 10-year bonds on the secondary market _ an indicator of investor wariness _ edged down by some 4 basis points but stayed perilously high at 6.08 percent. A rate of 7 percent is considered unsustainable over the long term.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.