LISBON, July 30 (Reuters) - Portugal’s Banco Espirito Santo lost 3.6 billion euros in the first half of the year - mostly on loans to its founding family’s crumbling business empire - and now has less capital than it is required to hold, the bank said on Wednesday.
The loss at the country’s largest listed bank wiped out its 2.1 billion euros capital buffer, and is likely to force the bank to resort to a new capital increase to preserve solvency ratios demanded by regulators.
The loss includes 4.25 billion euros in impairments and contingency measures, BES said. The biggest item was a provision of 1.2 billion euros on loans to the Espirito Santo Group - the bank said 856 million euros worth of those provisions were taken because the bank’s directors learned that BES had granted two letters in favour of creditors of the family group, which were not approved in accordance with internal procedures.
The bank said its board was assessing all the facts that lead to the period’s exceptional provisions, and “will take all measures within its reach to recover the maximum amount of the ... and to ensure the bank is reimbursed for losses caused as a result of any potential illegal behaviour that is identified.”
BES said its common equity Tier 1 ratio, a key measure of a bank’s financial strength, fell to 5 percent after the loss, below the minimum requirement of 7 percent.
Reporting By Andrei Khalip