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MADRID (Reuters) - Spain's Bankia (BKIA.MC) presented a series of error-strewn accounts for 2011, the year it listed shares, according to a report released on Thursday as part of a long-running court investigation into its flotation and state bailout.
Hundreds of thousands of small investors lost money after Bankia needed a massive rescue in 2012, less than a year after the lender's mid-2011 stock market listing. Some have alleged they were cheated when they bought the shares.
"(The accounts) do not comply with Bank of Spain norms ... due to the presence of accounting errors," the report said.
Spain's High Court opened a probe into the listing two years ago after a small political party brought a claim, though it is still not clear if or when there will be a trial.
Rodrigo Rato, a former International Monetary Fund chief who was chairman at the time of the flotation, has been questioned in court over the case along with some other former managers, and they have been accused of fraud.
The report takes issue with the treatment of deferred taxes and alleges that risks on some property loans were incorrectly classified. There was no suggestion in the report that these issues were affecting Bankia's current accounts.
Bankia, 61 percent state-owned, said it was analyzing the report and would respond at a later date.
Bankia was once the symbol of Spain's financial crisis, needing almost half of a 41 billion euro ($51 billion) European aid package for the banking sector, but it has since returned to profit.
The 2011 accounts were reformulated in May 2012 by Bankia's current team, headed by Chairman Jose Ignacio Goirigolzarri, and restated to reflect a 3 billion loss for 2011, rather than a 309 million euro profit.
Most of the errors from before were recognized in those reformulated accounts, the report said. But even then, losses for 2011 could have been underestimated by around 1.2 billion euros, because of the way some soured debts were classified, it said.
Bankia's auditor at the time, Deloitte, should have spotted the errors, the report said.
Deloitte could not be reached for comment.
Bankia's shares closed down nearly 6 percent on Thursday, compared with a 4.3 percent fall for the European banking sector .SX7P after the European Central Bank disappointed markets with its guidance on its steps to fight low growth.
Editing by Sonya Dowsett and Jane Baird