The market regulator today suspended trading in Banco Espirito Santo’s shares as they hit values measured in cents.
At one point the shares hit their lowest ever at €0.101 in reaction to the 6 month loss of €3.577 billion announced two days ago and indecision from the new management over its rescue plan – soon there may be no bank left to rescue.
The regulator decided to suspend trading in Banco Espírito Santo shares "due to the disclosure of material information."
This decision follows a collapse in value for shareholders. After a fall of 42% in yesterday's session, shares fell a further 49.75% today to a new record low of €0.101. The market capitalisation of this once major Portuguese fell to just €568 million.
This collapse in confidence is not surprising following the disclosure of the bank's results, i.e. losses of €3.570 billion, after recording impairments of €4.3 billion in the 6 months to the end of June 2014.
Clearly the soothing noises from the Bank of Portugal and the BES boardroom are having zero affect on market sentiment.
There still is talk of refinancing but the recent sale of share to prop up the bank was at over 60 cents per share compared to today’s price of 10 cents, leaving those early investors in BES’s future nursing painful losses.
If you owned BES shares a year ago you would have lost 82% on your investment when shares were suspended today, an astounding figure for a bank that the Bank of Portugal said was solid.
BES needs capital. The Bank of Portugal wants private capital to fill the gap at BES but the shares have been driven to such a low point that they are close to worthless.
The government has access to over €6 billion in European money earmarked to refinance banks in Portugal. Many in the city are suggesting that this would be a good time to invest in saving BES now that the family members have been pushed out and a professional manager Vitor Bento is in charge.
If Bento leaves this problem to run into next week there will be nothing much left to salvage.
See also: http://www.pieria.co.uk/articles/how_to_rip_off_a_bank_esprito_santo_style
