BANKIA has agreed to refund the amount paid for its shares to small investors, with 1% interest.
The State-owned entity, a fusion of Caja Madrid, Bancaja and other entities bailed out by European funds floated its shares on the stock market for the first time in July 2011, but has recently been found guilty of mis-selling by the Supreme Court.
A judge found that the information Bankia gave about its financial situation in its share advertising brochures was incorrect, making the bank appear far healthier in economic terms than it really was.
Chief Executive Officer José Sevilla says anyone who bought shares can apply for a refund plus interest at 1%, whether or not they have since sold these on.
Those who have sold will be able to claim the difference between what they paid initially and the proceeds of the sale.
Bankia shares went up to 80 cents on the stock market yesterday morning following a 4.7% increase – but this is still far short of the €3.75 they were sold at in 2011.
The bank had put aside €400 million to cover legal costs - €300m for court fees and €100m for paying interest on top, but by refunding the shares it will end the legal action and no longer have to pay this amount out.
José Sevilla says Bankia will be cutting its losses by reimbursing investors.
The entity earned just under €1.86 billion through its flotation, and the contingency of €1.84bn it set aside last year and €780m the year before is expected to be enough to pay everyone back.
Between July 2011 and March 2012, a total of €255m of the original €1.86bn had been sold on by shareholders.
It is expected to cost between €1.4bn and €1.5bn to refund investors.
The bank will need to spend between €300,000 and €500,000 in an advertising campaign to advise shareholders of their right to a reimbursement, and expects around 200,000 people will take them up on it.
Only those who responded to the initial share offer at the time of flotation will be entitled to money back, not those who purchased shares afterwards, nor those who have already received a favourable settlement after suing Bankia.
As at the end of 2015, Bankia had received 76,546 claims in the sum of €830m, and the courts had issued 13,478 final verdicts to a value of €82m.
Former directors of Bankia who invested in shares on a personal basis will not get their money back either.
Bankia is 64% owned by the Spanish State via its Ordered Banking Restructure Fund (FROB) after it received a European Union bailout in 2012.
Spain called for a 'rescue' fund of €10bn, but says it did not need to spend all this to save Bankia from going under.
Experts do not believe Bankia will ever be able to pay back the EU cash it received.