Spain's Bankia float defies odds in market storm

Bankia knew it had to address the Greek issue head on as it tried to convince investors to buy billions of euros worth of shares in the midst of Europe's sovereign debt storm. Fortunately for the Spanish savings bank, it was able to distance itself from the Greece-related market turmoil, which had derailed other floats.
"On the roadshow, one of the guys joked '(Chief Financial Officer) Carlos Stilianopoulos is the only Greek asset that we have ... There is very little exposure to Greece at the bank but he is the one guy'," said one person familiar with the matter. Bankia's initial public offering (IPO) couldn't have come at a more turbulent time in the markets. The offer period for the shares coincided with both a vote of confidence in Greek Prime Minister George Papandreou and a Greek parliamentary vote on an austerity package seen as key to averting a debt default.
It followed in the wake of a raft of aborted European IPOs in the preceding weeks. Spain's Telefonica abandoned the listing of its Atento call centre business only a day after Bankia began marketing its issue. Adding to the pressure on the bank and its advisers, the results of European-Union wide stress tests, which Bankia passed but five Spanish savings banks failed, were announced days before Bankia was due to set the final price for its deal.
Bankia completed its listing earlier this week, raising 3.1 billion euros ($4.5 billion) in the second biggest flotation in Europe so far this year after commodities trading group Glencore and the largest in Spain since the $6.6 billion IPO of Iberdrola Renovables in December 2007, according to Thomson Reuters data. The listing was a test not only of the bank itself, but also of confidence in the Spanish economy.
While many overseas investors gave it a wide berth, a bargain-basement price, an extraordinary campaign to get support from Spanish investors and the dogged determination of Bankia Chairman Rodrigo Rato, a former Spanish finance minister and International Monetary Fund chief, ultimately saw it through. "It was a pretty intense three months, the eyes of Europe were definitely on this one," said the person.
"If it didn't get done there would have been very negative sentiment around Spain more broadly, it would have been a signal that ... nobody thinks the banking system in Spain is fixable." Bringing one bank to market during such testing times would have been hard, but Bankia also had to compete with smaller rival Banca Civica for investor attention.
The two were under pressure to float as part of government-driven measures to increase solvency ratios and reassure global markets about the stability of Spain's financial system. Bankia, formed from the merger of seven savings banks, was also seen as a key test of Spain's overhaul of its banking sector. That meant huge political pressure on Rato.
"You got the feeling he was just really up against the wall," said one senior fund manager in London who met with Rato both before and during the IPO and noted a change in the pressure he appeared to be under. Publicly, Rato played down the possibility of not getting the IPO away, telling Reuters that while it was key for the sector's restructuring, Bankia was not "La Virgen del Pilar", a Spanish expression meaning it was not a miracle worker.
While one diplomatic source said there was a feeling Rato would be made a scapegoat if the IPO failed, those involved said the 62-year-old's determination to see it through proved key. "He is incredibly articulate and he is very switched on and he inspires confidence," said a senior banker. "People had a lot of confidence that this ship is being steered by the right management team through very choppy waters."