Portuguese high street bank Montepio Geral has a worrying level of exposure to the collasped Espírito Santo Group and already has written down €150 million that has little chance of being repaid as the group has sought protection from creditors in Luxembourg.
The Bank of Portugal has required that all financial institutions in the country write down at least 50% of bad debt in the Espírito Santo Group and in other companies that are unlikely to repay loans.
"Montepio made provisions above the minimum 50% required by Band of Portugal. In some cases this has been 85% of the exposure value," according to Montepio which will not reveal the other companies in which it holds investments that have turned sour.
In Montepio’s half year results the bank reported that it had "made a very conservative judgment of its exposure to Espírito Santo Group companies, so as to accommodate the effects of losses from those loans."
The total written down so far in the Espírito Santo Group collapse (€150 million), when added to other bad debts, shows up as a provision of €292 million in Montepio's first half results.
The more worrying figure is the €2 billion that Montepio carries in unsecured loans. This is of major concern to the central bank which has requested an audit into the 2013 figures in conjunction with the 2014 half year results as the unsecured loan figure has leapt €500 million in a year.
Montepio’s shareholding in Portugal Telecom (€75 million) almost will have halved in value in the past two months and there are questions over the bank's €40 million support of a Luxembourg based investment vehicle, Ongoing, which now is being examined by the forensic audit team at the Bank of Portugal. Expect more mess from the direction of Ongoing...
Comments
Its like taking an onion apart - a month ago it was just the main Espírito Santo group itself not honouring a loan to PT. Then it became BES coming apart. Then all the major businesses with connections to BES such as this one Montepio ...
Ongoing has been mentioned several times before and it has substantial links to PT amongst much else in Portugal such as PPP's .... why did no one dig into it sooner ?
http://pt.wikipedia.org/wiki/Ongoing_Strategy_Investments
The question that must seriously concern the northern euro states and the ECB is how much will this and other southern european 'lurking' demons unravel of their own banking sectors ?
Particularly as so much of southern europe is now on the beaches ... not in their offices.