Bloomberg News

Espirito Santo Says It Doesn’t Have ‘Exposure’ to Greek Debt

October 24, 2011

(Updates with CFO’s comments in third paragraph. For more on the euro crisis, click on EXT4 <GO>.)

Oct. 24 (Bloomberg) -- Banco Espirito Santo SA, Portugal’s biggest bank by market value, does not have “exposure” to sovereign debt issued by Greece, Ireland, Italy, Spain or France, Chief Executive Officer Ricardo Salgado said.

Espirito Santo does hold Portuguese government debt, Salgado told reporters in Lisbon today. “We do not believe there will be a restructuring of Portuguese debt,” he said.

The bank has about 3 billion euros ($4.2 billion) of Portuguese government debt, of which 80 percent has maturities of three to six months, Chief Financial Officer Amilcar Morais Pires said today. At market prices, the potential loss on those debt holdings is less than 100 million euros, according to Morais Pires.

Portuguese banks are required to reach a core Tier 1 capital ratio of 9 percent this year and 10 percent in 2012 as part of the country’s bailout package with the European Union and the International Monetary Fund. The aid program totals 78 billion euros, of which 12 billion euros are earmarked for the recapitalization of lenders should that be necessary.

Espirito Santo does not plan to use the Portuguese state’s recapitalization fund, Salgado said today. “Espirito Santo’s capital is perfectly adequate,” he said.

The bank last week said it plans to raise as much as 790.7 million euros by exchanging certain securities that will boost its core Tier 1 capital ratio, a measure of financial strength, by 147 basis points. It had a ratio of 8.2 percent in June. A basis point is one one-hundredth of a percentage point.

Espirito Santo is in a position to grow and even double its retail banking presence in Spain by acquiring branches, Spanish newspaper Expansion reported today, citing an interview with Salgado.

“I believe that it’s possible to find branches in Spain at a price that isn’t very high,” Salgado told reporters in Lisbon today. Espirito Santo’s branch network in Spain is still very small, he said.

--Editors: Frank Connelly, Dylan Griffiths

To contact the reporters on this story: Henrique Almeida in Lisbon at halmeida5@bloomberg.net; Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net


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