Portugal reassures markets on Espirito: shares fall

Shares in the lender were suspended on Thursday after a 17 per cent slump that sent shockwaves around the world

Stock markets around the world paused for breath as Portugal’s Central Bank managed to reassure investors over the health of the country’s second biggest bank, Banco Espirito Santo.

Shares in the lender were suspended on Thursday after a 17 per cent slump that sent shockwaves around the world amid fears that its troubles could even trigger another eurozone crisis.

Trading resumed after the Banco de Portugal said the bank had sufficient funds to handle losses on loans made to its troubled parent, the Espirito Santo Group “based on the information reported” by the bank and its auditor KPMG. “The safety of the funds entrusted to BES is not undermined and BES depositors may rest assured,” the central bank said.

With the Financial Conduct Authority once again banning any short-selling of Banco Espirito Santo shares, derivatives or credit-default swaps in London, trading reopened calmly, although the stock still lost just over 1 per cent of its value.

That meant a quiet, turbulence free finish to the week on European stock markets, with the broad based Dow Jones Eurostoxx 50 Index moving slightly ahead of Thursday close, gaining about a quarter of 1 per cent. 

The panic was in part sparked by the Bank of Portugal’s order of a special audit of the Espirito Santo Group. 

Portugal’s second-largest bank said that it had an exposure of €1.2bn  (£95m) to companies within the complex web of businesses and was “committed not to increase its total exposure” to either the parent or its subsidiaries.

It added: “The potential losses resulting from the exposure to Grupo Espirito Santo do not compromise compliance with regulatory capital requirements.”

Portugal’s Prime Minster Pedro Passos Coelho also chimed in saying there was “no reason for the state to intervene in a bank which has solid capital and a comfortable margin to deal with any eventuality, even the most adverse”.

The Espirito Santo Group owns a 25 per cent stake in the bank. It was recently diluted through a €2bn (£1.6bn)  rights issue.

Although yesterday’s statements have calmed the situation, some still have concerns.

“Although we welcome the latest disclosure from Banco Espirito Santo, which goes some way to enhancing the transparency on its exposure to the wider Espirito group, we still think the situation facing the bank remains precarious given the opacity around its parent’s capital shortfall,” said Ciaran Callaghan, a credit analyst at Merrion Stockbrokers in Dublin.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
i100
Travel
Suite dreams: the JW Marriott in Venice
travelChic new hotels in 2015
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect