LISBON, June 5 (Reuters) - Shares in Portugal's largest listed bank, Banco Espirito Santo (BES), rose as much as 5 percent on Thursday as investors bet on strong demand for its rights issue in spite of financial irregularities at a holding company, traders said.
At 1330 GMT, shares in BES were 3.26 percent higher at 1.077 euros apiece after rising as high as 1.098. The Lisbon benchmark .PSI20 index was 1.44 percent higher.
"BES shares are rising today, reflecting a conviction that the capital increase of 1.045 billion euros will succeed," said Pedro Santos, manager of XTB Portugal brokers.
"I think the idea that the bank is well protected from the crisis that is going on in the group is contributing (to the share rise)," he said.
Concerns surrounding the rights issue started when BES warned of "reputational" risks to the bank due to irregularities at one of the holding companies - Espirito Santo International - of the Espirito Santo family which controls BES.
The worries have focused on the fact that BES sold debt issued by Espirito Santo International through its branch network to retail clients.
Thursday is the first day that rights in BES' cash call cannot be revoked after trading in the rights ended on June 3. Shares in BES have risen 21 percent since May 28 - the day trade in the rights began.
Results of the rights issue will be announced on June 18.
"There seems to be a lot of confidence in the capital increase," said Paulo Rosa, a dealer at GoBulling in Porto.
"If you look at the adjustment to the capital increase, the shares haven't corrected that much. There is a lot of optimism. The evolution of the shares in the past few weeks reflect that."
Santos at XTB Portugal said capital increases like BES' had found demand among small investors, pointing to a cash call by bank Banif this week, in which it raised 138.5 million euros. (Reporting by Daniel Alvarenga, Writing by Axel Bugge; Editing by Mark Potter)