"The finer details of the merger and the internal structure still have to be tweaked but, even though we are in a situation of solvency, if business opportunities appear, we will definitely consider them". This statement came from Rodrigo Rato, Executive Chairman of Bankia, during his talk "The role of Bankia in the financial system's restructuring" at the latest Matins ESADE session, sponsored by Ernst & Young and La Vanguardia.
The bank's chairman explained, "We were committed to merging,[and now] we are in a climate where the financial system is being reduced and not expanded", which is why Bankia’s current road map entails focussing on the merger process of the seven savings banks involved and targeting efficiency, cost reduction and increased profitability, as well as being cautious with defaults and provisions, and "making the most of our synergies as a banking institution".
According to Rato, despite the merger processes in the banking sector, production capacity "is still excessive". On this note, he pointed out that Bankia has "a core capital of 10.6% and has taken charge of 25% of the total Spanish banking capacity". What's more, he vouched that "this process will have to be continued".
How to stabilise the real estate sector
Rodrigo Rato also highlighted that the Spanish banking sector "has made a great effort to achieve stability", resulting in that effectively between 56% and 87% of the banks' real estate asset losses have been covered at the moment. He went on to stress: "Our forecasts will protect us from further losses", given that, being a supporter of the financial reform, he said: "It will make us more efficient and stable".
Nevertheless, Rato aired his concern at the difference in recovery rates between different sectors. "The provisioning cycle of the real estate sector will be very long and, on the other hand, the restructuring cycle of the banking sector will be shorter". As he said, the question lies in knowing how to finance it. For this reason, he defended the possibility of creating an instrument (or a "bad bank") to align and segregate real estate assets.
On this point he stated that, whatever happens, "We must wait until the government makes a decision about legislation". "We will see that if by seeking out financial balancing, we can balance out financial provisions and real estate provisions", he added.
Anti-crisis fiscal union
Rato defended the idea that to overcome the crisis the European Union is necessary, as Spain cannot do so alone. "Our membership of the EU is beginning to become a restriction, because we have the single currency". In his opinion, "We cannot forget that the European solution is needed and that a Spanish solution alone is not possible. This involves fiscal union".
Therefore, the question is, according to Rato, how long will we take to reach this point and which determining factors separate us from this decision. On this note, he urged the European Union to set up a "fiscal convergence calendar, so that markets regain faith in Europe and that austerity policies follow a set course".
Rodrigo Rato, Executive President of Bankia, will feature this new session of Matins ESADE titled "The role of Bankia in the financial system's restructuring".
The chairman of Bankia will analyse the current status of the finance industry and the restructuring that is underway, highlighting the role of Bankia as one of the leading players in this process and as the bank which has undertaken the biggest merger in the European financial system in record time.
Welcome and closing: Miguel Trías (MBA 89), President of ESADE Alumni
Introduction and presentation: Alfons Sauquet (MBA 90), Dean of ESADE Business School.
Lecture: Rodrigo Rato, Executive President of Bankia
Discussion: Manel Pérez, Deputy Director at La Vanguardia
Rodrigo de Rato y Figaredo has been executive chairman of Bankia since December 2010 and of Caja Madrid since January 2010, as well as vice-chairman of the Spanish Confederation of Savings Banks (CECA) and board member of IAG and Mapfre. He is a trustee of the Museo Thyssen-Bornemisza and vice-chairman of the trustees board of the Teatro Real de Madrid. Prior to joining Caja Madrid, he was senior managing director of Lazard (from February 2008), chairman of the International Advisory Council of Criteria (from March 2008) and member of the International Advisory Council of Banco Santander (from January 2008). Rodrigo de Rato was second vice-president for Economic Affairs and Spanish minister of Economy and Finance from 1996 to 2002, when he was appointed deputy prime minister and minister of Finance, a post he held until 2004. He then joined the International Monetary Fund as managing director (2004-2007). In his time leading the Ministry of Economy and Finance, he acted as governor for Spain on the governing boards of the International Monetary Fund, the World Bank, the Inter-American Development Bank, the European Investment Bank and the European Bank for Reconstruction and Development, as well as presiding over the European Council of Finance and Economy Minister during the introduction of the euro in 2002. Member of Parliament since 1982, he was spokesman for the People's Party Parliamentary Group from 1989 to 1996, and head of the People's Party Economic Alternative from 1985 to 2004. Rodrigo de Rato is a graduate in Law and a doctor in Economics from the Universidad Complutense de Madrid, and holds a Master in Business Administration from the University of California, Berkeley.