Never before has a Portuguese company lost so much value on the stock exchange in one day.
BES shares today opened in Lisbon and collapsed in value by 45% in reaction to yesterday’s announcement that the country’s third largest bank had managed to lose €3.577 billion in six months.
This means that over €800 million in one day has been wiped of BES’s already ravaged value to leave it with a market capitalisation of just €1.13 billion.
The fall managed to drag down the PSI-20 index of Portugal’s top companies by nearly 9%. At one point BES shares were trading 51% down to a new record low of just 17 cents. A record number of BES shares were traded, over 420 million in a day.
A team of experts from the Bank of Portugal, the Portuguese Securities Commission (CMVM) and accountancy firm Deloitte already have started on a full forensic audit of the Banco Espírito Santo accounts and have commissioned computer experts to piece together the massive money laundering operation operated by BES and its other offshore dealings.
The Bank of Portugal and CMVM already have the results of an earlier audit on BES and another group company which is a good start point.
In the early hours of Thursday, in reaction to the BES 6 month results, the Bank of Portugal said that new facts about BES point to serious and deliberate mismanagement and there may well be criminal charges against former the BES chief executive and clan member, Ricardo Salgado, (pictured.)
Luis Marques Guedes, the Minister of Parliamentary Affairs, today acknowledged that there will be "impact on the economy, certainly" due to the Espirito Santo débacle and that "the economy has enough resilience" to withstand the side effects.
Vítor Bento admitted that BES needs to raise capital and sell assets, but did not quantify the size of the capital increase needed.
Some analysts estimate that the capital increase will need to be in the €3.5 to €4 billion range to set the bank back on its feet.
Certainly the bank will need €1.5 billion to €3 billion to mitigate the impact of the collapse of the Espírito Santo Group and the cost of other ‘irregularities’ under the crooked stewardship of Ricardo Salgado.
"The economy resents such a serious situation," said Luis Marques Guedes who for the first time hinted that the government might have to step in if a refinancing of BES is not fully supported by current and new shareholders.
This is a long way from the ‘no bail out clause’ and many will question whether the state has the duty to prop up yet another bank using taxpayers’ money.
BES ended the day to sink more than 42% in a session and that changed hands more than 400 million shares. Investors reflect fears about a capital increase, whose size is not known, then the losses have reached EUR 3.6 billion. Analysts pointed out a capital increase to four billion.
See also: http://www.pieria.co.uk/articles/how_to_rip_off_a_bank_esprito_santo_style
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