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FINANCIAL CRISIS

Bankia shares tumble due to 10.4-billion-euro hole

Independent audits reveal persistent negative equity problem at nationalized lender

Shares of troubled lender Bankia plummeted on Thursday by as much as 14 percent on the Madrid stock exchange after three independent audits showed that bank, and its holding company BFA, have a negative value of 10.4 billion euros.

Stocks were trading at 0.58 euros per share, a significant drop from the 3.75 euros investors paid in July 2011 when Bankia made its debut on the blue-chip Ibex 35. Bankia collapsed in May of this year when a hole of some 19 billion euros was uncovered.

Another nationalized institution, Banco de Valencia, dropped by 12.6 percent after the audits ordered by the government’s Orderly Bank Restructuring Fund (FROB) reflected that the lender had a negative worth of 6.341 billion euros on its balance sheets. Banco Valencia’s holdings are to be absorbed by CaixaBank.

Earlier this month, Economy Minister Luis de Guindos told Congress that Sareb, the “bad bank” asset management corporation set up by the government to absorb the toxic assets of most of Spain’s banks, had completed its shareholder structure. In the coming days, the four banks that were taken over by the government -- BFA-Bankia, Banco de Valencia, CatalunyaBanc and NCG Banco – will receive 36.9 billion in public money from the EU-backed bailout for Spanish banks once they complete their plans for recapitalization.

The four banks have also completed signing over to Sareb their toxic assets, which total about 37.11 billion euros. Of the total, 22.318 billion comes from Bankia.

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