Bailout fears spark Bankia shares dive
Monday 28 May 2012
Concern over the bailout plans for troubled Spanish lender Bankia and the country's ability to finance itself sent the nationalised bank's share price plummeting and Spain's borrowing costs soaring today.
Bankia's shares were down 21 % to 1.23 euro after trading following the bank's announcement on Friday that it will need 19 billion euro (£15.2 billion) in state aid - the country's biggest bailout - to shore itself up against its bad loans. The shares had closed at 1.57 euro before trading was suspended Friday.
Investors remained nervous over Spain's finances and whether it might soon join the ranks of Greece, Ireland and Portugal and seek an international bailout.
The interest rate, or yield, for 10-year bonds on the secondary market - a key indicator of market confidence in Spain's ability to raise funds - jumped 17 basis points in morning trade today to 6.46%. A rate of 7% is considered unsustainable in the long run.
In comparison, Germany's bonds, seen as a safe haven investment, were at 1.38%, 508 basis points lower than Spain's.
Trading on Madrid's main Ibex 35 share index was down 1 %.
Among the chief concerns surrounding Bankia's request for state aid is just how Spain plans to fund the bailout.
Bankia S.A., a fusion of seven savings banks - was one of the banks hardest hit by Spain's property collapse over the past four years.
It is estimated to have 32 billion euro (£25.6 billion) in toxic assets. The Bank of Spain had already agreed to inject Bankia with 4.5 billion (£3.6 billion) in rescue funds last June.
The size of the bailout figure came as something of a shock on Friday and opposition political parties are demanding the government explain how the bank got into such a state.
Bank of Spain estimates show Spain's banks are sitting on some 180 billion euro (£144 billion) in assets that could cause them losses.
The government fears the cost of rescuing the most vulnerable banks could overwhelm its own finances, which are already strained by a second recession in three years and an unemployment rate of nearly 25%.
Spain has long denied it will follow Greece, Ireland and Portugal and seek international help but the conservative government of Prime Minister Mariano Rajoy has called on the European Central Bank must do more to alleviate its exorbitantly high borrowing costs.
- 1 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Kim Kardashian on Bruce Jenner's 'story': 'We support him no matter what, and I think when the time is right, he'll talk'
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 5 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Amal Clooney gives excellent response to fashion question at European Court of Human Rights
Isis publicly behead man in Syrian town square for 'insulting Allah' as he screams for help
One spelling error costs Companies House up to £9 million after being sued for ruining business
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Have we reached 'peak food'? Shortages loom as global production rates slow
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...