Spanish bank's shares plummet 43%

Madrid - Shares of Bankia, the lender in the centre of Spain's banking crisis, tumbled on Monday while the ratings agency Standard & Poor's cut its credit rating.

Shares in Spain's fourth-largest bank, which has been granted about €18bn in eurozone aid, plummeted by 43% after trading started.

The bank restructuration fund FROB had on Friday slashed their nominal value from €2 to €0.01, the lowest possible level.

Investors on Monday rushed to sell Bankia shares, which only began trading one hour after markets opened, because demand did not match supply.

Standard & Poor's meanwhile cut Bankia's long-term debt rating by one notch to BB-, which is three levels below investment grade. The agency also downgraded Bankia's parent company BFA by one notch to B-.

The FROB has approved a €15.5bn recapitalisation for Bankia by May 31.

The recapitalisation will leave Bankia in a weaker position than had initially been thought, S&P said.

In late February, Bankia announced a record loss of €19.2bn in 2012. Bankia and BFA together reported losses of €21.2bn euros, after the group set aside nearly €27bn in provisions to clean up its balance sheets.

People who bought so-called preference shares in Bankia will lose 38% of their investment, the FROB said Friday.

The government is planning to create a fund to help some among hundreds of thousands of people who bought such shares in Bankia and other troubled banks. Many of the investors were unaware that they were acquiring complex and high-risk financial instruments.

Bankia was formed in 2010 by seven savings banks who had been hit hard by the collapse of Spain's property bubble two years earlier.

A huge financial gap was discovered at Bankia in 2012, leading to the resignation of its chairman Rodrigo Rato and its partial nationalisation.

The eurozone has released €18bn for Bankia as part of an aid package worth more than €40bn for the Spanish banking sector.

In order to satisfy the conditions set by the eurozone, Bankia intends to cut 4 500 jobs - out a total of 19 000 - this year.