* 2012 loss of 19.2 bln euros a record for a Spanish company
* Takes 24 bln eur provisions on bad property loans, assets
* Says cutting costs, deposits up, bad loans falling
* But weak Spanish economy seen hampering recovery
* Shares down 3.7 pct
(Adds reaction from former Bankia client, details)
By Sarah White and Jesús Aguado
MADRID, Feb 28 Rescued Spanish lender Bankia
reported tentative signs of recovery, even as huge
writedowns on bad property assets led it to post the country's
biggest ever corporate loss of 19.2 billion euros ($25.2
Bankia, at the heart of Spain's banking crisis since it
requested a state bailout in mid-2012, said on Thursday it would
return to profit this year, after deposits rose at the end of
2012 and it began cutting costs.
But the bank faces a big challenge in a country gripped by
recession and battling to reduce its government deficit, with
even healthier peers fighting rising bad debts.
"The clean-up has been very significant but Bankia's main
business, like much of the banking sector, is in Spain and the
outlook is complicated," BPI analyst Javier Barrio said.
Bankia's relatively upbeat stance came as Spanish telecoms
group Telefonica also showed signs of a domestic
turnaround after a painful restructuring and thousands of
Undermined by a property market crash, Spain's banks drove
the country to seek just over 40 billion euros from its European
partners last year to help clean up its financial sector.
Bankia was rescued less than a year after listing on the
stock market, leaving tens of thousands of ordinary Spaniards
who had invested out of pocket and furious.
The bank took nearly 24 billion euros of provisions on
soured property loans and assets last year in a bid to wipe the
slate clean. It has dumped those assets into a government-backed
"bad bank" set up as part of Spain's deal with Europe.
"It will be a complex year, a year of challenges," Chief
Executive Jose Ignacio Goirigolzarri told a news conference.
Bankia shares were down 3.7 percent to 0.29 euros at 1500
GMT, 92 percent below the 3.75 euros at which the bank's listing
A STABLE BASE
Goirigolzarri said Bankia was now stable, cutting costs "at
great speed" and aiming to give the government credible options
to recover its money by the end of 2014 or 2015.
The bank - in the midst of a fresh marketing campaign under
the slogan "Let's start at the beginning" - is targeting a
return on equity of over 10 percent for then and aims to post an
800 million euros profit for 2013.
Non-performing loans (NPL) dipped to 13 percent of its loan
portfolio in December, from 13.3 percent three months before.
But Bankia's NPL ratio is still much higher than the average
in Spain of 10.4 percent and does not include the troubled
property deals now in the bad bank.
Bankia said the high ratio, which could grow slightly in
2013, was down to a very prudent analysis of its loan portfolio,
90 percent of which was lending to individuals and small and
medium-sized enterprises at the end of 2012.
Executives also warned low interest rates would weigh on
Bankia will be around 70 percent government-owned once it
completes a capital hike from European funds, while 350,000
small shareholders, many of whom participated in its 2011
listing, will end up with a 1 percent stake or less.
The bank has yet to convert preference shares and
subordinated debt into capital, as it imposes losses on holders
of those securities as part of its rescue.
That process is likely to keep the lender in the public eye
as small investors campaign to get their money back, sparking
demonstrations across Spain, while some angry clients try to
take their cases to an arbitration panel for mis-selling cases.
"They've managed to scare off clients and kill the golden
goose," said Antonio Barahona, 75, who invested his life savings
in 68,000 euros of Bankia preference shares. A 40-year client of
the bank and its former incarnations, he now does no business
with Bankia and is trying to take it to court.
Bankia and its parent group BFA, which holds the firm's
stakes in various Spanish companies, requested 18 billion euros
in European aid last year. Bankia must now shrink its balance
sheet by about 60 percent as a condition of the rescue. It is
also cutting about 4,500 jobs and closing offices.
The Bankia-BFA group posted a yearly loss of 21.2 billion
euros, saying this would drop to 19.4 billion if gains from a
pending exchange of hybrid securities were taken into account.
($1 = 0.7628 euros)
(Additional reporting by Sonya Dowsett; Editing by Mark Potter
and David Holmes)