(Updates with president, message by CEO to clients)
By Axel Bugge
LISBON, July 21 Portugal's president warned on
Monday that fallout from the financial troubles of the founding
family of Banco Espirito Santo (BES) could affect the wider
economy, while the bank said it was appointing a special
financial advisor to help boost its capital structure.
President Anibal Cavaco Silva is the first high-profile
politician to warn of a possible economic impact from the
Espirito Santo crisis, after the family asked for creditor
protection for one of its key holding companies on Friday.
Last week another of the family's companies failed to repay
on time over $1 billion in debt owed to Portugal Telecom, which
had a knock-on effect on the latter's merger with Brazil's Grupo
Oi, forcing it to take a cut in its stake in the new
"If some citizens, some investors suffer significant losses
(from the Espirito Santo group) they may delay investment
decisions, or some of them may find themselves in very big
difficulties," Cavaco Silva said in comments during a visit to
South Korea, which were aired on local television.
"We cannot ignore that there will be some impact on the real
Portugal, which in May emerged from an EU/IMF bailout it had
to take during the euro zone debt crisis, is expecting its
economy to grow by 1 percent this year, the first year of growth
BES, Portugal's largest listed lender, is under
scrutiny following disclosures of financial irregularities at
Espirito Santo International (ESI), which filed for creditor
protection in Luxembourg on Friday. ESI indirectly owns 49
percent of the company that holds the Espirito Santos' stake in
The troubles have shaken financial markets outside Portugal,
although government bonds, which initially took fright, have
BES was controlled and managed by the Espirito Santo family
until just a few weeks ago, but they have since reduced their
stakeholding and left top jobs at the bank. Respected economist
Vitor Bento is the new chief executive after Ricardo Espirito
Santo Salgado, the family patriarch, resigned from the position.
Bento told clients in a message on Monday that he was
"working hard to regain the confidence of markets, to generate
sustainable benefits and to open a new chapter for the bank".
The bank also said on Monday it was finalising the
appointment of a special advisor that would help it to better
structure its capital base.
Portugal's central bank has said BES has enough capital to
cope with any losses resulting from the fallout of the financial
troubles of the family, whose companies owe the bank 1.2 billion
euros, and that it could tap private investors if there is a
BES raised 1.045 billion euros in a capital increase in June
but subsequent details about its lending to Espirito Santo
family companies and its troubled operations in Angola raised
fresh questions about whether it needs more.
BES shares have lost about 60 percent in a month and on
Monday closed down 3.1 percent at 0.4070 euros, while the Lisbon
PSI20 stock index was flat.
(Reporting By Axel Bugge; Editing by Sophie Walker and Will