martes, 5 de junio de 2012

en.ElConfidencial.com > Economy & Business THE AMOUNT REQUESTED FROM THE GOVERNMENT MAY NOT BE ENOUGH Bankia: €19bn may not be enough


Although it sounds incredible, the €19bn that Bankia, the troubled Spanish bank, has requested from the government to sanitize its accounts may not be enough. For instance, the purchase of the skyscraper designed by Norman Foster at the heart of Madrid's financial district, may add over €400 to the negative accounts.
That may not be all of it. More negative numbers are likely to appear when the finances of Bankia’s 380 real estate subsidiaries are being examined, a work that is now being done by the bank under the leadership of José Ignacio Goirigolzarri, the new chairman of the BFA-Bankia group.
Bankia was nationalized in May in an attempt to save the bank from collapsing, given its huge amounts of toxic assets, which risked affecting other entities in the sector. The Spanish government replaced the bank’s management team and ousted its chairman Rodrigo Rato, a veteran in the governing centre-rightPopular party.
The Foster tower
Bankia bought the Foster tower, the common name used for the Torre Caja Madrid at the north end of the Castellana, the boulevard that runs through Madrid's center, in July 2007 from Repsol, the oil giant, when the real estate bubble was only months from bursting, at a price of €815m.
Today, its market value is difficult to estimate, given that the real estate market is practically stalled, but according to consulted sources, its value may have dropped by at least 50 percent, which would equal about €400m.
Moreover, Bankia had to make use of some of the skyscraper’s floors to be able to register it as a building of their proper use and amortize over 50 years. If not, it would be considered an asset that could not be amortized.
Ironically, the Bankia team that was installed here, in a building that has come to be a symbol the construction bubble, was the team assessing risks in the real estate sector.
Other possible holes in the accounts
The exclusion of the provisions related to the Foster tower, however, is just one example of figures that may not have been included in the €19bn that Bankia has requested from the Spanish government.        
“We have 380 real estate agents, many of which not even the managers are able to find, but they are now looking into what is there,” according to one source, adding that “there is a great possibility for negative surprises, for sure the final number will be over €19bn.”
As previously reported by El Confidencial, there may be yet another problem with the valuation of Bankia, given that the bank group values it at €7bn compared to the €2bn that it is worth on the market
Although it is not obligatory to value it according to its price on the market – it is not a share for sale – the difference still seems to be too large not to lead to additional losses in the future, which would represent yet more capital not included in the €19bn. That is, unless its market value hikes.
Not clear how much the government will pay
On the other hand, it is not clear if the government will provide the total amount of €19bn, even if Finance Minister Luis de Guindos promised “all the capital that will be needed,” as the Ministry for Economy is now stepping back and trying to reduce the number as much as possible, following a storm of protests. 
The final amount that will be needed to rescue Bankia will be determined by the stress tests that will be conducted by the auditing firm,PriceWaterhouseCoopers.