Banco Espiririto Santo share price collapses on dreadful results
Banco Espirito Santo was hammered once again yesterday, as the struggling group’s share price collapsed even further following dismal results.
Shares fell by a shocking 42.07 per cent during the day, hovering just above €0.20. At the beginning of April, the price was nearly seven times as high, at just over €1.40.
Results released late on Wednesday night showed that the Portuguese bank had lost €3.57bn during the first half of the year. The bank’s common equity tier one ratio, a measure of the bank’s ability to weather a financial shock, fell to just five per cent – two percentage points lower than mandated by the Bank of Portugal.
Christian Schulz of Berenberg Bank said that the country’s recovery should not be damaged by the events: “The latest banking crisis looks like a large but isolated case: A private sector solution seems possible.”
“More importantly, the reserves Portugal has prudently amassed look sufficient to deal with any potential fallout for the tax payer.”
A spotlight was raised on the bank’s opaque ownership structure in May, when an audit of parent firm Espirito Santo International suggested that the group had financial irregularities and was in a serious condition.
Following the dreadful results, officials in charge of auditing and managing the risk of the bank were suspended by the country’s central bank. Professional services giant PwC will oversee the practices until new internal appointments are made. The bank will be attempting to raise capital as soon as possible.
The Espirito Santo Financial Group, which represents the banking dynasty that founded the group, will have its voting rights blocked by the Bank of Portugal
A week ago, it was announced that US financial institutions Goldman Sachs and DE Shaw had bought into the bank, prompting a short-lived jump in the share price.