September 1, 2017 / 9:40 AM / a year ago

Spain's Unicaja returns 604 mln euros in crisis-era state aid

MADRID, Sept 1 (Reuters) - Mid-sized Spanish bank Unicaja has paid back 604 million euros ($718 million) in state aid handed out to one of its businesses at the height of the country’s financial crisis, it said on Friday.

Spain had to request 41 billion euros in rescue funds from Europe in 2012 to help several banks crippled by losses after a property market bubble burst, pushing the economy to the brink of collapse.

Banco CEISS, which was later snapped up by Unicaja, was among lenders which received bailout funds from that EU package, in the shape of bonds that could be converted into capital.

Spain’s government has been trying to claw back some of the state aid in recent years amid an economic rebound, though much of the money poured into recapitalising and cleaning up the banking sector may never be recovered.

As well as the EU rescue package, billions of euros of state money and funds from Spain’s deposit guarantee fund — which is financed by the banking sector — were distributed via asset guarantee schemes and various forms of capital injections to try to help lenders cope with loans that turned sour.

Just over 60 billion euros of money spent on cleaning up the sector is likely lost forever, the Bank of Spain estimated in June.

Many of the small savings banks hit hardest by the crisis were later swallowed up by larger rivals for next to nothing when they were on the verge of failing. Spain’s banking sector shrank from more than 50 lenders to around a dozen.

Unicaja listed on the stock market in June this year, and earmarked the proceeds to repay the state aid. It had to go public by 2017 as a condition of the EU funds pumped into CEISS.

The Spanish government’s best bet to recoup more bailout funds is Bankia, the lender which received the biggest slice of aid, 22.5 billion euros.

The bank is majority controlled by the state through FROB, the government’s bailout fund.

The FROB started selling down part of its stake in 2014, turning a profit, and has recently appointed an adviser to place another chunk of the bank in the market, possibly in the coming months. ($1 = 0.8412 euros) (Reporting by Sarah White; editing by Jesús Aguado/Keith Weir)

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