Nationalised lender Bankia is expected to post first-half losses of more than €4 billion tomorrow, highlighting the need for capital from a European rescue of Spanish banks that is unlikely to arrive before the end of September.
Bankia was taken over by the government in May when it asked for €19 billion in state aid after anticipating the steep losses from real estate investments which soured after the property market crashed four years ago.
Spain has asked Europe for money to keep its banks afloat after a surge in bad debts as the economy sank into recession and is considering asking for a broader economic bailout.
It will also set up a bad bank to take on troubled assets from the rescued banks to clean up the sector.
Three analysts and a banking source with knowledge of the matter said they expected Bankia to report more than €4 billion in losses for the first half, worse than the total for the whole of 2011.
“The losses will be around €4 billion taking into account the new provisioning criteria already announced by the lender (when it was nationalised last May)”, the banking source said.
Bankia, Spain’s fourth largest lender after seven different savings banks were merged into one in 2010, is expected to report results for the first half of the year tomorrow, the last day it is allowed to do so.
After it took over Bankia in May, the government asked for a €100 billion lifeline from the eurozone to shore up its ailing banks, burdened with an estimated €184 billion in bad loans to property developers.
Banks are also facing rising loan defaults from other areas of the economy due to the recession and austerity measures aimed at reducing Spain’s deficit and making its debt more manageable.
A number of banks are expected to need aid but Bankia is expected to be the biggest taker because it is the most exposed to the real estate sector.
Europe made available emergency liquidity for Spain’s banks in August, but Bankia and the economy ministry say it can wait until the publication of a new bank-by-bank stress test due by the end of September.
According to the conditions attached to the European assistance for Spanish banks, Spain must provide details on how the aid would be used before it is disbursed.