Banco Espirito Santo Shares Suspended After 50 Percent Drop

Aug 01, 2014 11:36 am ET

Aug. 1 (Bloomberg) -- Banco Espirito Santo SA shares were suspended by Portugal’s securities regulator after they dropped as much as 50 percent in Lisbon.

The stock was trading down 40 percent at 12 euro cents before the CMVM suspended trading at 3:42 p.m. local time. The decline followed yesterday’s 42 percent slump.

The lender was yesterday ordered to raise capital after posting a 3.6 billion-euro ($4.8 billion) first-half net loss after it had to set aside money to cover souring loans to other members of the Espirito Santo Group. The Bank of Portugal is in talks over a capital injection involving both government and private investors, Jornal de Negocios reported today, without saying how it obtained the information.

The 4.25 billion-euro provision cut Banco Espirito Santo’s common equity Tier 1 ratio to 5 percent, less than the 7 percent regulatory minimum, according to a statement July 30. The central bank is also probing the lender’s former managers and suspended executives in charge of audit, compliance and risk management.

The Bank of Portugal considers it’s desirable that Banco Espirito Santo increases its capital only by resorting to the market, but is already working on a solution that combines public and private funds, Jornal de Negocios reported today, without saying how it obtained the information.

Banco Espirito Santo’s 750 million euros of 7.125 percent subordinated bonds due 2023 plunged 18 cents on the euro to 36.3 cents, a record. The bonds would be vulnerable to being exchanged for equity if the government were forced to invest in the bank.

An official at the Finance Ministry declined to comment and press officers at Banco Espirito Santo weren’t immediately available.

--With assistance from Henrique Almeida in Lisbon and John Glover in London.