Bloomberg News

Espirito Santo Said to Cut Capital Needs After Debt Exchanges

December 16, 2011

Dec. 15 (Bloomberg) -- Espirito Santo Financial Group SA expects to reduce the extra capital it needs to raise to meet European rules by about two-thirds following today’s 318 million-euro ($414 million) bond exchange, said a person with knowledge of the matter.

The transaction raised the group’s core Tier 1 capital ratio by 17 basis points to about 8.6 percent of risk-weighted assets, said the person, who declined to comment because the results are private. A separate bond exchange at the group’s banking unit on Dec. 5 raised 622 million euros of capital. The two deals will help cut the company’s capital shortfall to about 470 million euros from 1.6 billion euros, said the person.

European regulators are demanding the region’s banks bolster capital to withstand writedowns after they agreed to take losses on Greek bonds. The European Banking Authority last week gave lenders until the middle of next year to boost their capital ratios to 9 percent, using stricter criteria than those required by the Bank of Portugal.

The central bank said Dec. 8 that the country’s lenders needed to raise 6.95 billion euros to meet the EBA target, which was calculated using figures from the end of September. Banks that fail to raise the money from private sources will have to turn to their governments. Portugal’s banks can use a 12 billion-euro recapitalization facility set up as part of the country’s international bailout.

Espirito Santo Financial Group controls Libson-based Banco Espirito Santo, Portugal’s biggest lender by market value. Officials at Espirito Santo in Lisbon declined to comment.

--Editors: Edward Evans, Steve Bailey.

To contact the reporter on this story: Anabela Reis in Lisbon at areis1@bloomberg.net.

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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