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Fitch revises outlook on Bankia following BMN merger

Fitch Ratings on Feb. 6 revised the outlook on the long-term issuer default ratings of Bankia SA and parent holding company BFA Sociedad Tenedora de Acciones SAU to positive from stable, while affirming them at BBB- and BB+, respectively.

Concurrently, the agency affirmed Bankia's short-term issuer default rating at F3 and its viability rating at "bbb-." BFA's B short-term issuer default rating and "bb+" viability rating were also affirmed.

Bankia's issuer default ratings and viability ratings reflect its strengthened national retail franchise, adequate funding and liquidity and sound capitalization following its recent merger with Banco Mare Nostrum SA, according to the agency. The ratings also reflect Bankia's weakened post-merger asset quality metrics, as well as the challenges of integrating BMN and improving profitability.

The positive outlook reflects the agency's expectations that Bankia's asset quality will continue to improve in the next 24 months, helped by its management's history of managing down problem assets as well as Spain's benign economic environment, which reduce capital vulnerability to unreserved problem assets.

Fitch added that it expects Bankia's new three-year strategic update, to be presented Feb. 27, to focus on profitability improvement and asset quality, among other things.

In addition, the agency affirmed Bankia's and BFA's support ratings at 5 and support rating floor at No Floor.