EU debt crisis threatens Spain bank IPOs
By The Financial Times
The escalation of Europe’s debt crisis is threatening to scupper stock market listings by two Spanish savings banks seen as crucial to the overhaul of Spain’s banking system.
Executives from Bankia, Spain’s largest unlisted savings bank, and its smaller rival Banca Cívica, are in the middle of selling €5bn ($7bn) worth of shares in deeply discounted initial public offerings needed to avoid partial nationalisation by the Spanish government.
Cívica, which is aiming to raise €844m, delayed its listing by 24 hours, on a day when the difference between Spanish and German government bond yields hit the highest level in the history of the euro.
A senior commercial banking executive said that they expected the Bankia IPO to be scrapped by Friday if the volatile market conditions continued as shares in listed Spanish lenders dropped for a second day.
Bankia remains officially confident that it will be able to complete its listing. Executives acknowledged that it was a grim time to try to launch an IPO, but said they believed Spanish institutions would support the process and buy shares in order to preserve the credibility of the country’s financial system.
The listing of Bankia, which was formed from a merger of Caja Madrid and six other regional Spanish savings banks, is viewed by Spanish officials as a key step in the government’s attempt to restructure the country’s financial system.
Senior executives at other banks have also said it is in their interest to see the IPO succeed given Bankia’s systemic importance.
“Many of the institutions involved have a vested interested in calming down the market,” said one Bankia executive. “Domestic institutions might see at this stage part of their future being dependent on this happening”.
Bankia has said that it had already seen a high level of subscription by the Spanish public, with the bank planning to sell 60 per cent of the offer to retail clients.
“The process is developing very satisfactorily,” said Rodrigo Rato, Bankia executive chairman and former International Monetary Fund managing director, on Monday. Mr Rato said that the tranche of the listing to be sold to institutional investors had almost been covered, and noted interest from fund managers in the UK, France, Germany and other European countries.
Many of Spain’s cajas, run as private foundations and have no conventional outside investors, have suffered severe losses after the collapse of Spain’s housing and construction boom ended a decade of cheap lending to developers and property speculators.
Bankia has priced its listing at a 54 per cent discount to its book value, with Cívica offering a discount of 60 per cent, decisions reflecting both lenders’ recognition of the need to assuage investors’ concerns about the Spanish economy.