The Bankia absorption by CaixaBank begins to deliver positive signals for the state. The government has shown a strong commitment to increasing the share of aid that can be recovered, with the Regular Bank Restructuring Fund (FROB) accounting for 24.069 billion euros injected during the financial crisis. The combined entity is projected to generate profits exceeding 1 billion euros for the public sector this year, based on the fund’s accounting framework. This comes after recorded losses of 3.556 billion in 2020 and 1.483 billion in 2021, as reported by the press.
That said, this is accounting profit. It does not erase the bank bailout or the public debt, and many effects appeared in the state’s accounts when funds were disbursed to stabilize banks that faced bankruptcy in 2012. Yet, accounting rules require the amount deemed recoverable from public investment to be tracked annually in FROB accounts. The recoverable amount, which had been shrinking in the years before the merger, was further reduced by the operation that moved CaixaBank from majority state control to minority status for the state. The state now holds a minority position while CaixaBank has the larger stake. Improved stock market performance by CaixaBank has begun to shift this balance again in favor of the public coffer.
FROB, which controls both Bankia’s parent company BFA and the Bankia subsidiary, calculated its stake not from hypothetical market values but from the net worth of the entire group minus minority holdings. The 2020 CaixaBank merger forced BFA to reclassify its Bankia stake, triggering downward asset revaluations. This revised the group’s net worth from 9,530 million euros to 5,974 million euros and contributed to the 3.556 billion euro loss reported by FROB.
New accounting criteria
In the 2021 accounts there was a further impairment of the recoverable value. When BFA ceased to be part of the Bankia group, FROB began valuing its stock based on BFA’s standalone net worth, adjusted for any easily verifiable hidden gains, if present. Consequently, BFA’s net worth rose from 4,029 million to 4,491 million in 2020 after a 14 percent stock market revaluation of its Bankia stake and the CaixaBank merger. Despite this rise, FROB still recorded a loss of 1.483 million in its 2021 accounts, tied to the merger and the absence of compensating hidden gains.
By 2022, the situation reversed. CaixaBank gained nearly 45 percent in the stock market so far that year, while BFA’s standalone net worth reached 4,937 million at year end. Added to strategic capital gains of 916 million within Catalan banking interests, the recoverable value stood at 5,853 million, yielding a benefit of 1,362 million for FROB compared with 2021. The final 2022 figure will depend on CaixaBank’s fourth-quarter performance, which had risen about 6 percent up to that point.
Final invoice
FROB president Paula Conthe told Congress last week that the fund is likely to close the year with a profit for the first time since its founding in 2009. She noted that this is not yet a revaluation of BFA’s stake, nor a signal that accounting profit alone changes the broader outlook. “FROB works every day to maximize aid recovery,” she said.
Still, the senior official argued that the CaixaBank–Bankia merger could enable the state to receive more aid in total. Since the two entities announced their deal in September 2020, public engagement has risen by about 130 percent in the market, from 1.965 billion to 4.550 billion. “Even if we must acknowledge that the path ahead is not simple, the improvements are real,” she conceded. Therefore, the final bailout bill will remain uncertain until the state exits the capital, with the end-of-2023 deadline potentially extended by the government.
At present, public coffers show just 346 million euros, or about 1.4 percent of the 24.069 billion injected. Bankia has returned 3.303 million in dividends from CaixaBank, but these funds have not flowed into government accounts because they served to offset the decline in BFA’s assets caused by losses since 2015 amid the negative interest-rate environment. This kept the group from returning the initial capital to the FROB, in line with the 2012 European Commission agreement.