Summary: Bankia S.A.

Solid banking franchise in Spain with around 10% market share. Enhanced risk management to benefit future credit performance. Improving efficiency and asset quality. Finalization of Banco Mare Nostrum (BMN) integration and challenging business turnaround. Modest core operating profitability. Large holding of less-liquid SAREB bonds. The positive outlook indicates the possibility of Spain's economic and operating environment becoming more supportive, ultimately strengthening banks' creditworthiness in the next 12-24 months and therefore leading us to revise up our anchor for banks operating primarily in Spain. An upgrade would also depend on Bankia successfully integrating BMN and continuing to improve its financial profile. Post-merger, we expect the bank's solvency to reach a risk-adjusted capital (RAC) ratio in the range of 8.0%-8.5% as of

...Large holding of less-liquid SAREB bonds. Outlook: Positive The positive outlook indicates the possibility of Spain's economic and operating environment becoming more supportive, ultimately strengthening banks' creditworthiness in the next 12-24 months and therefore leading us to revise up our anchor for banks operating primarily in Spain. An upgrade would also depend on Bankia successfully integrating BMN and continuing to improve its financial profile. Post-merger, we expect the bank's solvency to reach a risk-adjusted capital (RAC) ratio in the range of 8.0%-8.5% as of December 2018 through organic capital generation and issuance of hybrid instruments, while its stock of problematic assets will reduce by one-fifth in the next two years to reach about 10% of total exposures. We could revise the outlook to stable if we do not see prospects of the economic or operating risk environment in Spain easing further for banks, or if other risks offset the potential benefits of a more supportive...

Summary