Banco Espirito Santo today rejoined Portugal’s stock exchange and despite two ratings downgrades the stock rose on re-entry.
The Bank of Portugal issued a statement saying that there was no danger of BES being unable to cover what it owes and that there was no risk to global markets.
Portugal's central bank could not really say anything else and its regulatory role in the BES scandal later will see some frank and open discussions with government as to how BES was allowed to fool its shareholders for so long with hidden losses and dubious practices.
Shares in BES fell 17% yesterday before they were suspended and today initially leapt back 12% when the stock market regulator allowed the banks shares to be traded again. This was short lived as the stock then headed back down to where it had opened.
Recent revelations at BES caused nervousness in European exchanges yesterday which the Bank of Portugal’s soothing message failed to calm.
The acid test for contagion is the bond issue scheduled for next week when Portugal will try to sell €1.2 billion of debt to international institutions.
The danger is that the interest rates achieved for the bonds will have risen due to the BES scandal that has left Ricardo Salgado, the great nephew of the banks’ founder, singularly responsible for a fracturing in Portugal’s fragile fiscal recovery.
The controlling family no longer have a controlling share in BES due to an emergency rights issue but the intestinal complexity of the group structure sees the multi-millionaire Salgado still with influence despite a performance as chief executive that has seen shareholder value evaporate.
BES also attempted to reassure the market that its solvency was not at risk, but then it would say that, wouldn't it...
