The Bankia Signal

Another Friday, another wait for economic news out of Spain.

The results of the second part of an audit of Spain’s banks  – started in May and with particular reference to their funding needs – is likely to be released today [Friday] around 1600 GMT.

It’s a good time to note that in fact, Spain’s main banks are actually rather strong in capital terms and certainly relatively speaking.

This article on from Seeking Alpha from June, has some excellent data and comments which should help to differentiate such giants as BBVA and Santander from their smaller and sometimes upstart sector peers.

It’s the smaller, more regionally focused ‘cajas’ and the newer entities to which we should conclude any barbed comments in Oliver & Wyman’s report might be aimed.

Foremost amongst the struggling newer entities must be Bankia.

It takes quite a suspension of scepticism to regard this bank as sound in all respects.

It was formed at quite near the peak of the last phase of Europe’s debt crisis in December 2010, from seven regional savings banks.

It was the fourth-largest bank in Spain with 12 million customers in May 2012.

The same month, Spain failed to avoid publicly declaring it would have to provide actual financial backstops and intent of the same for Bankia.

Beyond what has publicly been disclosed though, that’s all we know.

And it might not matter much anyway, since the stock has halved from flotation levels and the only folk still interested are the daredevils and perhaps interests on the Spanish state side.

Even so, there are still ways the stock can tell us interesting things as we watch it from the sidelines. I’ve put together a few charts of Bankia’s stock price. Each bar on them represents one day of trade.

Chart 1 – Bankia stock price over three months [Bar-per-day] 

This one shows the range bound nature of what is now a relatively closely-held banking stock, over three months.

Chart 2 – Bankia stock price – zoomed to Sept. 11 to Sept. 26

Zooming in we can see the day of the most pronounced buying this month was on September 11, a day on which the stock gained more than 10%.

Looking at the volume bars underneath the candles, we can see that despite the jump, that day wasn’t a day with the biggest volume — in other words a relatively few buyers were eventually willing to buy the stock at 10% higher than most of the market was willing to buy.

The stock went from a low of EUR1.26 to a close of EUR1.388.

The day before the day of determined buying, the stock looked to be on the verge of piercing the 100-Day Moving Average line.

That line, regardless of the validity of such views or not, is widely regarded by traders as one signal of strength which a stock needs to remain above in order to continue being regarded as worth buying.

Looking rightwards, we note the short candles representing relative stability in a range for several days.

We come to a couple of days ago, and note the stock had slipped beneath another signal line, the Exponential Moving Average.

Here’s Bloomberg’s delayed ticker for the stock.

Of course, since September 11th, the 100-day moving average line has collapsed.

But the stock price is today but a few cents from the point at which someone or a few parties [for the most part] thought they had to step in, earlier in September.

Hence today, being the second-most crucial news day for Spanish banks of the year, one could reason that the same parties might like to act again, so long as they had a burden of proof on their side [AKA audit results.]

Failure on their part to act in a similar way as on September 11, would imply ‘support’ being withdrawn and levels past EUR1.26 [and perhaps beyond] potentially being breached.

The stock is as I write at EUR1.286.


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