Fears grow over Portugal's biggest bank Banco Espirito, trading halted
Published 11/07/2014 | 07:45
Fears over financial troubles at the family-owned holding companies behind Portugal's largest listed bank have spilled across markets and borders and are growing.
Portugal's stock market regulator halted trading in Banco Espirito Santo after the shares fell 19pc.
The sell-off followed a decision by Espirito Santo Financial Group (ESFG), which owns 25 percent of the Portuguese bank, to suspend trading in its shares and bonds due to "material difficulties" at its own largest shareholder, Espirito Santo International (ESI), which is controlled by one of Portugal's most important business clans, the Espirito Santos.
The move will prove a concern in Europe about the health of the banking sector.
The market regulator said it would ban short-selling in BES stock on Friday.
ESFG, a conglomerate that also owns an insurance company and a Swiss bank, said it was halting trading while it assessed the impact of its exposure to ESI.
The movements in Portugal, which only recently exited an international bailout started at the height of the euro zone debt crisis in 2011, rattled investors continent-wide, and stock markets plunged.
U.S. stocks also fell, joining the European sell-off driven by troubles at the Portuguese bank.
Market volatility prompted Spain's Banco Popular to call off a 750-million-euro bond issue, and construction firm ACS also withdrew a planned issue. Shares in small Spanish lender Liberbank, which said it had a 0.93 stake in Espirito Santo Financial Group, fell almost 10 percent earlier on Thursday, ending the day down 2 percent. Greece managed to place just half of a planned 3 billion euro bond placement.
Even with Thursday's jump in Portuguese yields - 10-year-bonds rose above 4 percent - the levels are however a far cry from the height of the debt crisis when they reached 17 percent. And Spain still managed to successfully get an inflation-linked bond away.
The Bank of Portugal said on Thursday the "solvency situation of BES is solid," and that the central bank had taken steps to ensure there is no contagion from Espirito Santo companies on the bank.
Portugal's government still has 6 billion euros in funding available to rescue its banking sector.