Bloomberg News

Spain State-Run Banks to Shrink Balance Sheets, Carrascosa Says

November 27, 2012

Spanish nationalized banks including Bankia SA (BKIA) will have to make major cuts to their balance sheets by order of the European Commission, said Antonio Carrascosa, head of the government’s bank bailout fund.

“Tomorrow there will be a press release and certain details of these plans,” Carrascosa said in a seminar in Madrid today. “What is clear is that they suppose a significant reduction in the balance sheets of companies and there will be obligations in everything that has to do with shrinking the balance sheet -- cuts in offices, staff and loans.”

Spain sealed an agreement in July to take as much as 100 billion euros ($129.6 billion) of aid from Europe to help stabilize its banking system as investor concern about the extent of loan losses threatened to further undermine confidence in government finances. European Competition Commissioner Joaquin Almunia is slated to announce in Brussels tomorrow terms of restructuring plans for Spanish lenders set to get European aid.

Fitch Ratings said it expected Spanish banks that are being bailed out to shrink in size by at least 25 percent.

“Resilient banks will take advantage of others that are receiving state aid and shedding businesses as part of their restructuring plans,” the ratings company said in a statement sent by e-mail today.

Bankia, a nationalized lender that in May requested 19 billion euros from the government to clean up bad loans, said it will announce tomorrow a new strategic plan through 2015. Chairman Jose Ignacio Goirigolzarri told shareholders in June the bank would seek to reduce its 60 billion euros of non- yielding assets by more than half over three years.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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