Spain starts Bankia privatisation process

<p>Spain has started to privatise the Bankia bank.</p>

Spain has announced it has started the privatisation process for Bankia, which has been hit hard by the country's financial crisis.

The global crash hurt Spain harder than most major European economies and Bankia was one of the companies to particularly struggle as a result of the recession, as well as its after-effects.

In a bid to get the bank back on its feet, Spain's government has decided to sell off shares in the bank to private investors in order to improve its financial situation.

Bankia shares closed on Thursday at 1.58 euros (£1.29) each, resulting in a valuation of 1.36 billion euros for the stake in the bank.

Commenting on the move, Spain's economy minister Luis de Guindos said: "This is truly a sign of the shift in perception and of the reality of our financial system.”

Bankia's financial situation has been boosted in the last couple of years and its most recently released results, for the full year 2013, showed that it made more than 500 million euros. This is compared with the previous 12-month period, when the bank made a loss of 19.2 billion euros. This was the largest loss ever recorded by a corporation in Spain.

Share offer

The offer of shares in Bankia was just 7.5 per cent of the organisation yesterday (February 27th), but it is expected it will be rolled out further in the coming months.

The Spanish government currently owns more than two-thirds (68 per cent) of Bankia after bailing it out in the middle of the global crash. However, Spain intends to sell no more than 18 per cent of the total stake in the company, as the government wants to retain control of Bankia for the time being.

Banks were also bailed out in the UK as a result of the recession. The UK government saved Royal Bank of Scotland (RBS) and Lloyds TSB, which have seen contrasting fortunes in the years since the move. RBS announced a loss of more than £8 billion for the full year 2013 earlier in the week, while Lloyds TSB returned to profit before splitting into Lloyds and TSB.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.