Espirito Santo Discloses 1.2 Billion-Euro Exposure to GES
By Joao Lima and Henrique Almeida Jul 11, 2014 3:18 AM GMT+0200
Banco Espirito Santo SA, Portugal’s second-biggest bank by market value, said it has exposure of 1.18 billion euros ($1.6 billion) to companies of Grupo Espirito Santo and is waiting for the release of that group’s restructuring plan to assess any potential losses.
“Banco Espirito Santo’s executive committee believes that the potential losses resulting from the exposure to Grupo Espirito Santo do not compromise the compliance with the regulatory capital requirements,” the Lisbon-based bank said in a regulatory filing. “Banco Espirito Santo is committed not to increase its total exposure to Espirito Santo Group.”
The bank said that it has a capital buffer of 2.1 billion euros above the regulatory minimum of 8 percent for the common equity Tier 1 ratio as of March 31, taking into account a capital increase completed in June. The figure for exposure includes loans, securities and other items as of June 30.
The Portuguese lender provided the update on its exposure after one of the group’s companies missed some short-term debt payments. Banco Espirito Santo’s
stock dropped more than 17 percent yesterday before being suspended from trading by the securities regulator, and the bank’s bonds fell to record lows. The regulator last night said short selling of Banco Espirito Santo shares is banned during today.
Espirito Santo Financial Group SA, which owns 25 percent of Banco Espirito Santo, yesterday said it decided to suspend its shares and listed bonds on the Luxembourg and Euronext exchanges due to “ongoing material difficulties” at Espirito Santo International SA, its biggest shareholder. Espirito Santo Financial said it’s assessing the financial impact of its exposure to Espirito Santo International.
Retail Clients
Espirito Santo Financial is 49 percent owned by Espirito Santo Irmaos SGPS SA, which in turn is fully owned by Rioforte Investments SA, which is fully owned by Espirito Santo International.
Banque Privee Espirito Santo SA, which is fully owned by Espirito Santo Financial, on July 8 said there was a delay in payments of some of the latest maturities of short-term debt securities issued by Espirito Santo International. The delays affect “only a few clients,” Banque Privee said.
Banco Espirito Santo said in the statement released late yesterday that its retail clients hold 255 million euros of commercial paper issued by Espirito Santo International, 342 million euros of commercial paper issued by Rioforte, 44 million euros of commercial paper issued by Rioforte subsidiaries and 212 million euros of commercial paper and bonds issued by Espirito Santo Financial and its subsidiaries.
Espirito Santo Financial Group has issued a 700 million-euro guarantee to cover debt instruments issued by Espirito Santo Group companies and distributed to Banco Espirito Santo retail clients, the statement said.
‘Adequately Isolated’
Separately, the bank said that institutional clients held 511 million euros of debt securities issued by Espirito Santo International and 1.5 billion euros of debt securities issued by Rioforte and its subsidiaries.
Banco Espirito Santo has been “adequately isolated” by the Bank of Portugal from the financial problems in some entities of Grupo Espirito Santo, Parliamentary Affairs Minister Luis Marques Guedes said on July 3. The bank was the only one of the three biggest publicly traded Portuguese lenders that didn’t request state aid after the country received a European Union-led bailout in May 2011.
Portugal has injected a total of 5.6 billion euros in banks that aren’t state-owned through the 12 billion-euro recapitalization facility that is available as part of the 78 billion-euro aid program.
To contact the reporters on this story: Joao Lima in Lisbon at
[email protected]; Henrique Almeida in Lisbon at
[email protected]
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