Portugal's BES insists family losses will not put bank at risk

Fri Jul 11, 2014 4:15am EDT
 
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By Laura Noonan and Axel Bugge

LISBON/LONDON (Reuters) - 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 on Thursday night.

Shares in Portugal's largest listed bank were suspended on Thursday after plunging as much as 19 percent in morning trading 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 750 million euros ($1.02 billion) bond issue, and Greece managed to place just half of a planned 3 billion euros bond issue.

The interest rate on Portugal's 10-year bond rose from recent lows to above 4 percent.

In a late-night statement that paved the way for the bank's shares to resume trading on Friday, BES attempted to diffuse a situation that many feared was spiraling 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, adding that it had 2.1 billion euros extra capital beyond regulatory minimums as of March 31.

Since then, the bank has raised 1.045 billion euros 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.

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A man leaves the headquarters of Portuguese bank Banco Espirito Santo (BES) in Lisbon July 3, 2014. REUTERS/Rafael Marchante