LISBON May 21 Shares in Banco Espirito Santo
(BES), Portugal's largest listed bank, on Wednesday
fell towards the lower price of the bank's planned capital
increase of up to 1.045 billion euros, as it warned of
"reputational risks" at a holding company that has a stake in
it, traders said.
At 1410 GMT shares in BES were 2.25 percent lower at 0.998
euros after earlier hitting a low of 0.975 euros. The Lisbon
PSI20 share index was 0.61 percent lower.
"Fundamentally, the shares are falling in the direction of
the theoretic price of the ex-rights cash-call, which is
slightly above 0.9 euros," said Andre Rodrigues, an analyst at
Caixa Banco do Investimento.
BES shares have fallen sharply since the bank said last week
it would carry out a rights issue of up to 1.045 billion euros
($1.43 billion), at a discount of about 34 percent to the
stock's price before the announcement. The capital increase will
be carried out at 0.65 euros per share. The bank is raising the
cash to strengthen its balance sheet.
Late on Tuesday, BES said the subscription period in the
rights issue would be from May 27 until June 9. As of May 22,
shares in BES will no longer carry the rights to the capital
In the document on the capital increase, the bank listed the
risks included in the operation. Among them was a warning about
the "reputational risks associated with the potential
deterioration or perception of deterioration of the financial
position of Espirito Santo International (ESI) or its
Espirito Santo International holds 49 percent of Espirito
Santo Financial Group (ESFG), which in turn holds 27.5
percent of BES. In 2013, ESFG posted a loss of 864 million
euros, hit by an impairment of 700 million euros due to debt
instruments by Espirito Santo International.
"The financial situation of ESI may affect the reputation of
BES and its shares," the prospectus document said, adding that
an external auditor had found "irregularities in its accounts
and concluded that the company represents a serious financial
Jose Novo, a trader at iTrade brokers, said the decline in
BES' shares was due to the capital increase but "these risks,
which were recognised by BES do not help the shares."
BES was not immediately available to comment.
($1 = 0.7318 Euros)
(Reporting By Sergio Goncalves, writing by Axel Bugge. Editing
by Jane Merriman)