July 23, 2014 / 12:35 PM / in 4 years

UPDATE 1-Portuguese bank shares surge on news of BES investors

(Adds detail, comment, share price reaction)

By Laura Noonan and Filipa Cunha-Lima

LISBON, July 23 (Reuters) - Shares in Banco Espirito Santo rose as much as 10.5 percent on Wednesday as investors took heart from a late Tuesday announcement that two major U.S. institutions had taken a combined 5 percent interest in the bank.

Other Portuguese banks, whose shares suffered in recent weeks as concerns mounted around BES, also rose strongly, with Millennium bcp up 5.9 percent at 1210 GMT and Banco BPI up 3 percent, taking Portugal’s PSI20 stock index 1.25 percent higher.

Tuesday night’s flurry of Portuguese banking announcements also included news that Millennium had completed a 2.25 billion euros ($3.03 billion) capital increase where bids outstripped the shares on offer by 26 percent.

The other announcements all referred to BES, Portugal’s largest listed bank by assets, which has lost about 50 percent of its value in the last month as investors fretted about its exposure to the debts of founding family the Espirito Santo.

After markets closed in Lisbon, BES announced that Goldman Sachs had taken a 2.27 percent interest in the bank on July 15, while U.S. hedge fund D.E. Shaw had taken a 2.7 percent stake a day earlier. The family, which remains the bank’s largest shareholder, sold 4.99 percent of the bank around the same time.

Less than an hour later, one of the founding family companies, Rioforte, announced it had applied to a Luxembourg court for protection from its creditors.

Rioforte owes 220 million euros to BES and is a shareholder in ESFG, which owns 20 percent of the bank.

“BES’ rise today reflects mostly the purchase of a stake by Goldman Sachs ... Rioforte asking for creditor protection has already been expected,” said Albino Oliveira, an analyst Fincor brokers in Lisbon.

Another family holding company, ESI, announced on Tuesday it had been successful in its petition for creditor protection which it filed last week.

Gualter Pacheco, a trader at GoBulling, also said news of the new investors was driving the BES stock move.

“If Goldman Sachs and DE Shaw buy stakes of more than 2 percent it’s because they consider BES’ price interesting, they think that BES will overcome its difficulties and it’s also a very positive signal for other investor interest,” he said.

Caixa Banco de Investimento banking analyst Andre Rodrigues said Millennium’s capital increase was “positive news” and changed his rating on the stock to “buy” from “accumulate”.

$1 = 0.7427 Euros Addtional reporting by Patricia Rua; Editing by Erica Billingham and Mark Potter

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