Bankia to repay 2.5 billion euros to shareholders over next three years

Spain's state-controlled Bankia on Tuesday said it would return 2.5 billion euros ($3.1 billion) of excess capital to shareholders over the next three years in an effort to pay back part of public bailout cash. Bankia got a 22.4 billion-euro rescue package in 2012 to recover from property-loan losses at the height of Spain's financial crisis. The government is now selling off the 61 percent stake it holds.
The bank's chairman, Jose Ignacio Goirigolzarri, said institutional investors were interested in taking part in its privatisation. Spain's bailout fund FROB has until the end of 2019 to sell its stake in the bank. As part of its 2018-2020 strategic plan, Bankia is shifting away from mortgage lending and increasing volume growth by segments, such as consumer lending, property development and corporate activities, after the European Union lifted some restrictions.
In an effort to boost earnings, Bankia agreed in June to acquire BMN to create Spain's fourth largest bank. In its turnaround plan, Bankia also it would invest around 1 billion euros as part of its digital push. On Tuesday, Bankia said it would raise its dividend pay-out ratio to 45 to 50 percent in 2018-2020 from a current 41.7 percent, leading to a dividend-per-share of 0.43 euros in 2020 versus 0.26 euros in 2017.
Goirigolzarri said share buybacks or extraordinary dividends could also be an option for returning capital. Bankia said it would finish 2020 with a core-tier 1 fully loaded capital ratio, the strictest term of solvency, of above 12 percent. All capital above this threshold will be paid back to shareholders.
On Tuesday, at 1119 GMT, Bankia shares were up 1 percent as Spain's leading index, the Ibex-35 was down about 0.2 percent. The lender said it expects profit of 1.3 billion euros in 2020 and hopes to increase its return on equity to an adjusted 10.8 percent in 2020 from 6.6 percent at the end of 2017, thanks to higher interest rates and banking fees.
Bankia also said the BMN transaction was expected to generate gross cost synergies of 190 million euros in 2020. As part of its ongoing effort to clean up its balance sheet, Bankia said it expected to reduce its non-performing assets by 9 billion euros in the next three years as Spain's economy continues to recover. It said it was considering selling a real estate asset portfolio to a third party. It also said it would end 2020 with a non-performing loan ratio of less than 4 percent compared to 8.9 percent in 2017.