Why Bankia’s dividend matters

That is the goal of the management team, seasoned professionals who have taken on an unexpected challenge and are seeking to heal the entity whilst simultaneously maintaining its identity.

Bankia’s managers –in the wake of the biggest financial crisis in the history of Spain, which endangered the solvency of the country- are interested in recovering orthodox management standards, but are also determined to do so quickly.

They aim to return to the market by promoting the sale of the company to private investors and to end the guardianship which the state assumed when it supplied a rescue package. Such an outcome would count as mission accomplished for Bankia’s management team.

Paying a dividend against 2014 results was a significant milestone. Along the way, the new management team met with problems inherited from the previous regime: the sale of shares to individuals during the IPO of 2010, which for many was close to a scam, and has been confirmed as such in subsequent judicial rulings. The question of who should bear the cost conditioned the results for 2014 and, consequently, the ability to distribute dividends.

The Spanish Treasury Ministry argued that it was the responsibility of Bankia as part of the rescue, adding that the state had already provided enough funds to avert disaster. The management team reasoned in pragmatic terms, that the state should pay some or all of the costs involved, arguing that it was more profitable to the FROB -the taxpayer- to protect the balance sheet and share price of the bank before the sale of shares by the FROB.

For the purpose of speed, the privatisation process should happen as soon as possible, preferably in the lifetime of the current Government.The final arrangement, two thirds to be paid by Bankia and one third by the FROB, is satisfactory because it enables a first dividend pay out which is indicative of a normalisation of the bank´s operations and signals and end to the crisis. This should facilitate an improvement in the company´s outlook and allow the FROB to attain a better price for the funds that have been committed. Speed ​​counts.