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Spain's Bankia reports massive loss

Spain's Bankia reports massive loss
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Nationalised Spanish lender Bankia has announced losses of 4.45 billion euros between January and June. That was worse than its total for the whole of 2011.

Immediately afterwards Spain’s national bank-rescue fund said it will inject emergency cash into Bankia to keep it solvent. It did not say how much.

Illustrating how big Bankia’s problems are, it is setting aside 2.7 billion euros to cover loans in just the second quarter that likely will not be repaid.

Bankia, which is Spain’s fourth largest lender, was created by merging seven different troubled savings banks in 2010.

After it took over Bankia in May, the government asked for a 100-billion-euro lifeline from the eurozone to shore up its ailing banks. They are burdened with an estimated 184 billion euros in bad loans to property developers during the property boom.

Banks are also facing rising loan defaults from other areas of the economy due to the recession and austerity measures aimed at reducing Spain’s deficit and making its debt more manageable.

A number of banks are expected to need aid but Bankia is expected to be the biggest taker because it is the most exposed to the property sector.

Bankia originally reported a 300 million euros profit for 2011, but after the government bailout was announced, it began writing down bad loans, repossessed property and restated the results to show a 2.98 billion euros loss.