* Retail customers have 651 mln euros of family company
* BES has about 1 bln euro exposure to family companies
* BES's Angolan unit guarantee covers 70 percent of loans
* Espirito Santo Group to give restructuring details soon
(Adds ban on naked short sales)
By Laura Noonan and Andrei Khalip
LONDON/LISBON, June 30 Shares in Banco Espirito
Santo fell to an 11-month low on Monday after
Portugal's biggest listed bank failed to allay investor concern
about the company's dealings with its founding family and its
troubled Angolan operations.
Banco Espirito Santo's (BES) shares have fallen more than 40
percent since a 1.045 billion-euro ($1.43 billion) share sale on
June 11, amid a crisis that saw Portugal's only banking dynasty
lose control of the bank and its patriarch agree to step down as
In an eight-minute conference call led by the bank's chief
financial officer, Amilcar Morais Pires - the leading candidate
to become its next CEO - BES provided new detail about issues it
said had been "impacting" investors' view of the bank.
BES, which has been embroiled in controversy for selling
bonds from a financially troubled company linked to its founding
family to retail customers, disclosed for the first time how a
large proportion of the bonds have been redeemed since December.
The executives also said the bank had less than 1 billion
euros ($1.4 billion) of its own exposure to companies in the
wider Espirito Santo Group, and gave details of a guarantee
underpinning its troubled operations in Angola.
Shares in the bank closed down 16.5 percent at 0.602 euros,
below the subscription price of 0.65 euros for its capital
increase. Their intraday fall accelerated after the comments by
The declines were so sharp that Portugal's CMVM market
regulator announced late Monday it would ban naked short-selling
of shares in BES and Espirito Santo Financial Group (ESFG), a
holding company of the Espirito Santo family, on July 1. ESFG
shares fell 19 percent on Monday.
Concern about BES also helped push Portuguese government
bond yields higher on Monday.
"It was a very short call and little new information," said
Albino Oliveira, an analyst at Fincor brokers. "I guess the main
thing causing the fall is that uncertainty will go on for
another month until the general assembly that will decide on new
leadership at BES."
Concerns about BES first came to light when a prospectus for
its June capital raising referred to the reputational risks
linked to selling retail customers bonds that were issued by an
Espirito Santo company with financial problems.
The executives said BES's retail customers were now owed
just 651 million euros from the bonds, down from 2.5 billion
euros at the end of last year.
After regulators raised concerns about the bond sales, the
bank vowed that no customers would lose any money on them. On
May 30 Espirito Santo Group (ESG) said that it would no longer
sell debt through BES.
BES executive Joaquim Goes said retail customers' remaining
exposure to founding-family companies was split between two
entities - Espirito Santo International and Rioforte. The family
owns about 25 percent of BES, making it the bank's largest
The bank itself has no direct exposure to Espirito Santo
International, but has a 200 million-euro exposure to Rioforte
and its subsidiaries and 780 million-euro exposure to ESFG
, Goes said.
BES did not clarify the nature of its Rioforte and ESFG
exposure and did not accept any questions at the end of the
call, which was co-hosted by Goes and Pires.
On the wider group, Goes said: "The Espirito Santo Group is
implementing a reorganisation and restructuring plan. This plan
includes the reinforcement of the capital structure as well as
the sale of assets among other measures.
"Further details ... are expected to be disclosed by
Espirito Santo Group within the next couple of days."
BES executives also used the call to clarify the situation
of its Angolan operations, which were granted a sovereign
guarantee in 2013 after it was discovered that part of the loan
portfolio did not have an appropriate level of guarantees or
Goes said the unit, which counts BES as a 55 percent
shareholder, had a guarantee covering about 70 percent of its 6
billion-euro loan book, but that the guarantee only extended to
The remaining 30 percent of the loan book will be assessed
by the European Central Bank as part of its review of the euro
zone's 128 most important lenders, he added.
($1 = 0.7331 Euros)
(Reporting By Laura Noonan and Andrei Khalip; Additional
reporting by Sergio Goncalves and Axel Bugge in Lisbon; Editing
by Steve Slater and Mark Potter and Larry King)