Miles Johnson in Madrid

Shares in Bankia tumbled by as much as half yesterday as the final steps of the largest bank rescue in Spanish history crystallises a near total loss for its shareholders less than two years after it listed on the Madrid stock exchange.

Bankia shares, which were listed in summer 2011 at €3.75 in a sale marketed to hundreds of thousands of retail investors and deposit holders, opened down more than 50 per cent at €0.12. They closed down 41.4 per cent at €0.14.

The slump in the stock followed the finalisation of a €15.5bn injection of new capital on Friday that wrote down the nominal value of each Bankia share to €0.01, the lowest value possible under Spanish stock market rules.

Standard & Poor’s yesterday cut Bankia’s credit rating by one level to BB minus, or three levels below “junk”, after the agency raised doubts about the quality of its capital raising. The downgrade was prompted by the decision to convert €6.5bn of the nationalised lender’s hybrid debt into equity, which the agency said was not as much as it had expected.

“We consider this level of capital to be ‘weak’,” S&P said, adding that the state of the Spanish economy raised doubts over the execution of the bank’s restructuring strategy.

Bankia, the product of a seven-way merger between savings banks dominated by Spain 's ruling Popular Party, became the symbol of the country's financial crisis after it requested the largest bailout in Spanish history last May.

The bank, then run by Rodrigo Rato, the former Spanish finance minister and managing director of the International Monetary Fund, had listed on the Madrid stock market in the summer of 2011 in a deal then hailed as the solution to Spain's banking crisis.

However, negligible demand from international and institutional investors meant that the bulk of the newly listed entity’s equity was placed with small retail clients who have since lost 99 per cent of their money.

When the Spanish high court looked into the listing and failure of Bankia this year, clients of the bank - some of whom had lost money buying preference shares that had been packaged as savings products - staged frequent protests against its former management.

Juan Pablo Lopez, an analyst at Espirito Santo, warned that the injection of new capital posed a risk to the value of Bankia, as it had imposed large losses on many deposit holders who had subscribed to its stock market listing.

(c) 2013 The Financial Times Limited