Spain's Bankia sells 126 mln euro bad loan portfolio

MADRID, Oct 10 (Reuters) - Spanish bank Bankiasaid on Wednesday it had sold a 126 million euro ($162.5million) portfolio of bad debt to Norwegian investment group,Aktiv Kapital, as it raises capital ahead of a European bailout.

Bankia is one of four state-rescued Spanish banks first inline for receiving up to 100 billion euros in aid from Europe.Their recapitalisation plans must receive European approval byNovember.

By selling off loans, banks cut down the amount of capitalthey have to hold to support the loans. This is the second saleof a bad loan portfolio Bankia has made in three months after itclosed a 800 million euro deal in July.

"This sale will have a positive effect on the bank's resultsbecause the loans were totally written off in terms of capital,"the bank said in a statement.

Spanish banks have been forced to write off hundreds ofbillions of euros of bad real estate investments undergovernment demands in an attempt to free up their balance sheetsand get credit flowing to families and businesses.

The Bankia portfolio consisted of bad loans linked to carpurchases. Spaniards are defaulting on loans as they battle highunemployment, public spending cuts and the worst economicslowdown in half a century.

Sources told Reuters last week Bankia was preparing to sell500 million euros in loans.($1 = 0.7754 euros)

(Reporting By Sonya Dowsett; Editing by Jesús Aguado and LouiseHeavens)

(([e-mail])(+ 34 91 585 8328)(ReutersMessaging: [e-mail]))

Keywords: SPAIN BANKIA/