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Spain's Bankia 2014 results hit by compensation provisions

By Jesús Aguado and Sonya Dowsett

MADRID (Reuters) - Spanish lender Bankia has reported annual earnings hurt by provisions to cover potential compensation claims from thousands of investors in its 2011 flotation, who were left out of pocket by its subsequent state bailout.

Bankia, rescued in 2012 at the height of the euro zone debt crisis, said on Saturday net profit rose 22 percent from the year before to 747 million euros, after the bank as expected set aside 312 million for any payout, representing the maximum potential liability linked to the float.

The provision equates to the first 40 percent of total costs estimated at 780 million euros, while its parent BFA would assume the remaining 60 percent if necessary.

The results came a day after Bankia said it would pay its first-ever dividend, in a symbolic move to return some of the funds from its 22.5 billion euro (16.19 billion pounds) bailout.

Paying a dividend means giving money back to the state as a shareholder, Bankia Chairman Jose Ignacio Goirigolzarri noted.

Bankia also on Saturday reported a 14 percent rise in net interest income - broadly what a bank earns on assets minus what it pays out on deposits - to 2.9 billion euros, in line with analysts' expectations.

But its loan book shrank by 6 percent during the year, in line with other Spanish banks.

The bank also reported an improvement in loan quality at end-December, as Spain's economy rebounded from a six-year downturn. Bad loans as a percentage of total loans stood at 12.9 percent against 14.7 percent a year ago, though the ratio remains above the average for Spanish banks.

(Editing by Pravin Char and David Holmes)