Investors Show Interest in Bankia Appetite for the Bank Is Part of Spain's Turnaround Story
MADRID—Spain has received expressions of interest from investors for part of its 70% stake in Bankia SA, BKIA.MC -4.59% Finance Minister Luis de Guindos said, an indication that the lender at the heart of the country's banking crisis may return to private hands sooner than expected.
"There's interest; it is logical. The perception of Spain has improved, and Bankia's image has improved a lot," Mr. De Guindos told The Wall Street Journal and correspondents of four European newspapers. "The bank has been cleaned up, its restructuring plan is ahead of schedule and it has a solid management team."
He cautioned, however, that Spain has no imminent plan to start selling its Bankia shares. "We haven't made a decision," said Mr. De Guindos, whose ministry is overseeing the cleanup. "We believe that, as time passes, the perception of Bankia will improve further."
The European Union, which bailed out Spain's banking system last year, has given the government until 2017 to complete a restructuring of Bankia and sell its stake. At Tuesday's share price, a 70% stake would be valued at about €7.9 billion.
Prime Minister Mariano Rajoy's government alarmed global investors in May 2012 when it moved to nationalize Bankia with a plan to inject €19 billion ($25.7 billion) into the bank. Doubts about the country's solvency were rampant, and investors yanked money out of Spain, making it almost impossible for the government to finance itself and forcing it to seek an EU rescue for the weakest lenders.
Bankia received about half of the €41 billion Spain used under the bailout program, which formally ends in early January.
In recent months, investors have begun to look at Spain in a different light, thanks in part to the banking-industry cleanup. Money is pouring back into the euro zone's fourth-largest economy, which emerged from a two-year recession in the third quarter of this year. Foreign investors have snapped up property, bank stocks, corporate bonds and other assets they shunned last year.
"Spain seems to have been able to convince investors that it is heading in the right direction," said Nicholas Spiro, managing director of Spiro Sovereign Strategy. "Investors see a turnaround story there."
Madrid's stock market has rallied this year, and investor demand has driven down Spain's borrowing costs.
The government has cut public spending and raised taxes to meet an EU target that it reduce its budget deficit to 6.5% of gross domestic product this year and 5.8% next year, from 6.8% in 2012. Mr. De Guindos said that for the first time in five years, Spain is on track to meet its deficit target, thanks also to lower borrowing costs, which will reduce government spending on interest payments by approximately €8.5 billion this year.
"There's no risk of slippage" this year, he said.
While the EU has said that Spain can meet its deficit goal for this year, officials in Brussels predict that it will miss its 2014 target by 0.1 percentage point, and they are advising the government to make additional cuts. Mr. De Guindos said that won't be needed because the impact of some structural overhauls has yet to show up in the numbers.
Mr. De Guindos said the government is in the final stages of selling another rescued lender, Novagalicia Banco.
Several Spanish banks and international investment funds have studied Novagalicia's books in recent weeks, and some of them are likely to file binding offers this week. The government is looking to wrap up the sale of Novagalicia before the end of the year, Mr. De Guindos said.