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
ebooks
ebooksA celebration of British elections
  • Get to the point
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

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power