LONDON/MADRID: Spanish savings bank Bankia, which narrowly passed European Union-wide stress tests, raised 3.1 billion euros ($4.4 billion) after cutting the price of its share flotation hours before the offer closed on Monday.
With the listings of Bankia and smaller rival Banca Civica seen as a key test Spain's overhaul of its banking sector, pressure to complete the offerings had already pushed the pair to offer their shares at a steep discount to book value.
On Monday, Bankia -- the merger of seven regional banks led by heavyweight Caja Madrid -- said it cut its offer price to 3.75 euros per share. The price was 15 percent below the bottom end of its original 4.14-5.05 euros range.
The price values Spain's third-largest bank at 6.5 billion euros, excluding an overallotment option. The amount raised matches the offering's theoretical proceeds used in the stress test scenario. Shares will start trade on Wednesday.
Order books on the share sale were fully covered at the new lower price, Bankia said, -- now equivalent to 0.4 times book value, compared with an original 0.46-0.51 range.
Bankia and Banca Civica have forged ahead with their initial public share offers, despite the euro zone debt crisis, as member countries dither over a rescue for Greece, which has pushed Spain's borrowing costs to all-time highs.
"The listing has taken place in a very jittery environment and under a lot of pressure, pushing the price to a relatively attractive level for the investor," said one Madrid-based fund manager with orders for Bankia and Banca Civica shares.
Orders came mostly from domestic investors, one source said.
Getting international investors involved in financials is difficult, and in Spanish financials is much more difficult," said the source.
The new price places Spain's largest savings bank at an even greater discount to its peers, with domestic mid-sized banks like Popular and Sabadell trading at around 0.6 times book value.
A source close to the Banca Civica deal said it had no immediate plans to follow suit and cut its price. Another source close to the deal pointed out the bottom of Banca Civica's range was already at a 60 percent discount to book value.
Therefore Bankia's new lower price brought it into line with Banca Civica, he said.
Given the size of the Civica deal they are probably in a better relative position," said the first source. Banca Civica is looking to raise up to 844 million euros by floating 45 percent of its capital.
Civica is expected to fix its IPO price on Tuesday.
Bankia passed the stress tests published on Friday with a Tier 1 capital adequacy ratio of 5.4 percent of risk-adjusted assets, just above the cut-off point of 5 percent. Banca Civica was also a close pass with a ratio of 5.6 percent.
Five of the eight European banks that failed were Spanish and a further seven Spanish banks were close to failing.
The Bank of Spain and Spain's economy minister have said the Spanish banking system is well capitalised and the banks which failed the stress tests do not have to raise fresh capital.
Bankia had hoped to raise 4.2 billion euros from the offering, rising to as much as 4.6 billion if a 10 percent overallotment option is exercised.
Our capital hike objective has been easily covered considering we've been achieved nearly double the initial estimated need of 1.8 billion euros, putting us in a privileged solvency position," Bankia said in a statement late Monday.
Institutional orders accounted for 40 percent of the offering, with the remaining 60 percent offered to retail investors.
Bank of America Merrill Lynch, Deutsche Bank, JP Morgan, UBS and Bankia itself are running Bankia's IPO, while Credit Suisse and Morgan Stanley are bookrunners on Civica's offering.
Copyright Reuters, 2011
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