Banco Espirito Santo says it is not at risk of running short of capital
Losses on loans to the troubled business empire of its founding family will not put Banco Espirito Santo at risk of running short of capital, the bank said last night.
Shares in Portugal’s largest listed bank were suspended yesterday after plunging as much as 19% amid fears about its exposure to companies in the wider group controlled by the powerful Espirito Santo clan.
The ripples of the crisis extended to other vulnerable euro zone countries. Spain’s Banco Popular called off a €750m bond issue, and Greece managed to place just half of a planned €3 billion bond issue.
The interest rate on Portugal’s 10-year bond also rose from recent lows to above 4%.
In a late-night statement that paved the way for the bank’s shares to resume trading today, BES attempted to diffuse a situation that many feared was spiralling out of control.
“BES Executive Committee believes that the potential losses resulting from the exposure to Espírito Santo Group do not compromise the compliance with the regulatory capital requirements,” the bank said.
It added that it had €2.1 billion extra capital beyond regulatory minimums as of March 31.
Since then, the bank has raised €1.045 billion in a June share sale that saw the Espirito Santo family lose control of the bank and prompted its patriarch, Ricardo Espirito Santo Salgado, to step down as the bank’s chief.
But concerns about its financial position mounted as other companies in the Espirito Santo empire showed signs of distress.
Espirito Santo Financial Group, which holds a 25% stake in BES and is the bank’s largest shareholder, yesterday asked for its shares to be suspended due to “material difficulties” at its own largest shareholder, Espirito Santo International (ESI).
BES said that it is “waiting for the release of the restructuring plan of Espírito Santo Group in order to assess the potential losses related to its exposure.”
That restructuring is expected to be announced imminently.