Spain's Bankia asks for $24B in state aid

By Harold Heckle and Ciaran Giles

Associated Press

Published: Friday, May 25 2012 7:46 p.m. MDT

In this Friday, April 20, 2012 file photo Spanish Government spokeswoman and Deputy Premier Soraya Saenz de Santamaria points her pen during a press conference following the conservative government's weekly Cabinet meeting at the Moncloa Palace, in Madrid. Spain's market regulator suspended trading of shares in bailed-out Bankia on Friday May 25, 2012, ahead of a key board meeting at which the lender is expected to decide how much more rescue money it needs from the government. (AP Photo/Daniel Ochoa de Olza, file)

Associated Press

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MADRID — Spain's troubled bank, Bankia, asked the Spanish government for $23.8 billion in financial support on Friday, the day that a leading credit rating agency downgraded it to junk status.

Jose Ignacio Goirigolzarri, the bank's president, said late Friday that the bailout would "reinforced the solvency, liquidity and solidity of the bank."

The request came as Standard & Poor's downgraded Bankia and four other Spanish banks to junk status because of uncertainty over restructuring and recapitalization plans.

Trading in Bankia shares was suspended Friday while its board determined how much new aid was needed. The bank's shares have experienced turbulent trading in recent weeks on fears it would not be able to cover the massive losses it has built up in bad loans to the country's collapsed real estate sector.

Concern about the health of Europe's banks is a key constituent of the region's financial crisis. Spanish banks are seen as particularly shaky because they were heavily exposed to the country's collapsed real estate bubble and now hold massive amounts of soured investments, such as defaulted mortgage loans or devalued property. Bankia has been the worst-hit and holds $40 billion in such toxic assets.

Bankia S.A. was created from the merger of seven regional banks, or cajas, that were deemed too weak to stand alone. But financial concerns continued to plague it — its shares have lost almost half their value since the lender went public last July.

The government decided to intervene earlier this month, effectively nationalizing Bankia, and injected $5.7 billion in aid.

Its shares closed at $2.01 on Thursday after shedding more than 7 percent.

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