Espirito Santo: The Full Timeline

Tyler Durden's picture

Remember when everyone ignored this story about Espirito Santo in May: "Portugal's Largest Bank "In Serious Financial Condition" Auditor Warns." Good times. Alas, one can only kick the can of Europe's banking sector insolvency so far before everything blows up in everyone''s face all over again and Draghi has to come out of his crypt and spook everyone that he will do "whatever it takes" to ignore reality and just pretend stuff is fixed which carries Europe over for a few more months before the whole charade has to be repeated.

In the meantime, those who would rather ignore Draghi's illusiory European utopia, in which infinite carry trades will magically fix everything, and instead prefer to focus on the reality, here is Bloomberg with the full timeline of how Spain's largest lender "completely unexpectedly" ended up on a death bed.

First, the org chart:


Here are ESFG's numerous lines of business:

Since accounting irregularities were identified at Espirito Santo International in May, Espirito Santo Financial Group’s (ESFG) junior debt has fallen by ~95 cents on the euro while Banco Espirito Santo’s (BES) Tier 2 bonds have shed 21 cents over the same period. BES’ and ESFG’s shares have dropped 33% and 53%, respectively, from closing May 20 to closing yday

BES’ two largest shareholders are ESFG, which owns 25%, and Credit Agricole (14.6%)

ESFG is 49%-owned by Espirito Santo Irmaos, which in turn is fully owned by Rioforte Investments, which is fully owned by closely-held Espirito Santo International (ESI)

May 20:

  • External audit concluded ESI in “serious financial situation,” BES said in prospectus for rights offer

June 11:

  • BES CEO Salgado said reduced influence of “core group of shareholders” may imply “governance adaptations

June 19:

  • BES board to resign, Expresso reported; process to approve new governance model concluded by end of July

June 20:

  • Espirito Santo dynasty loosens grip on 94-yr-old namesake bank
  • BES shares suspended from trading at the request of regulators, Euronext said

June 26:

  • Ratings of BES and ESFG placed on review for downgrade at Moody’s

June 27:

  • Luxembourg justice authorities investigating three Espirito Santo holding cos., Reuters reported
  • BofAML cuts BES senior and subordinated bonds to underweight from overweight

June 28:

  • Grupo Espirito Santo invites creditors of ESI to become shareholders in Rioforte, Expresso reported

June 30:

  • Portugal Telecom confirms it held EU897m in CP issued by Rioforte
  • BES, ESFG naked short sales temporarily banned; regulator cites declines in both shares

July 1:

  • BES holds EU980m of debt from Grupo Espirito Santo cos., Diario Economico reported

July 3:

  • ESFG said not under investigation by Luxembourg authorities; ESFG also said:
  • Exposure to Grupo Espirito Santo was EU2.35b as of June 30
  • Exposure to ESI and Rioforte was EU1.37b at end of 2013
  • Borrowing from BES was EU823m as of June 30
  • Borrowing from BES was EU823m as of June 30

July 5:

  • Bank of Portugal said BES will now be ‘perimeter of supervision’ after reduction of ESFG’s voting rights in BES
  • Credit Agricole said it will support ESFG proposals for BES

July 7:

  • Market levels between ESFG and BES T2s widen; analysts flag BES de-consolidation as likely outcome

July 8:

  • Banque Privee Espirito Santo said ESI delays S-T debt payment
  • Banque Privee clients receive proposal to convert GES debt, Expresso reported
  • Portugal Telecom debt deal draws criticism from Brazil’s state development bank BNDES

July 9:

  • ESFG long-term ratings cut three levels to Caa2 by Moody’s; On review for downgrade
  • BES shareholders to vote on new Chairman, CEO and CFO on July 31
  • CMVM probes Portugal Telecom’s Rioforte CP investment, Expresso reported

July 10:

  • ESI considers insolvency request, if it can’t reach debt renegotiation agreement with main creditors, Diario reports
  • ESFG suspends shares and listed bonds on Luxembourg and Euronext stock exchanges

* * *

And as an added bonus, here is ESFG's disclosure on deposits:

Liquidity risk arises from present or future inability to pay liabilities as they mature without resulting in exaggerated losses. Banks, by virtue of their business of providing long–term loans and receiving short–term deposits, are subject to liquidity risk. In recent years most banks have increasingly resorted to obtaining funds from market sources instead of from their traditional sources (retail deposits), especially in countries where savings are typically scarce due to economic stagnation, as is the case in Portugal. It is therefore important for banks to maintain a prudent and sound management of their liquidity risk, particularly in times of market turmoil. Although the ESFG Group puts great effort into liquidity risk management, focusing on maintaining surplus liquidity in the short term, the ESFG Group is exposed to the general risk of liquidity shortfalls and cannot ensure that the mechanisms in place to manage such risks will be suitable to eliminate liquidity risk

And this:


You know it's getting bad when Portugal's biggest bank's bond yields are worse than Argentina's


Source: Bloomberg

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Leonardo Fibonacci2's picture

Well... I'm giving my Portuguese banker a kick in the shorts.... I was going to buy NFLX this morning cause it is a growth stock & i like to watch my DEXTER!

Squid-puppets a-go-go's picture

ur portugese chicken is COOKED!

and on top of all the other bad news, Baltic dry index continues dropping like a stone.

knukles's picture

I'm not even gonna try to turn on CNBS for shits and giggles this morning.  Instead, I think I'll just wander over to the lock up 5150 ward at the local hospital and see some real fucking insanity.  Actually makes more sense

insanelysane's picture

You're missing some great propagander but as to Portugal apparently they were forcing all of their banks to buy government bonds and now there is one less bank to buy their bonds people are starting to worry.  Portugal just needs to turn around, bend over, and let someone from Belgium help them out.

HardlyZero's picture

Argentina F'd up the whole banking sector financially (July 2014 is epoch).

China shadow banks show the weak 'structure'.

Espirito Santo family held company.

See East Europe banks fall and lite all the way up the European stripline.

Manufacturing is crumbling too.

Putting on my shorts again.

knukles's picture

Looks like the priority of payments waterfall for some of the worst structured deals I've ever seen.
Complexity breeds insanity.
Occam's Razor, Bitchez!


PS.  Than don't forget there was that Austrian Bank the other day in the Land of Pipa-Linnie that had trouble.  But that was Austrian and no Austrian Bank ever caused any troubles  Now, Annanukian Gold Buyers, LTD of Los Angles, there might be a problem there.  The owner has a funny look about him.  Pointed tongue darting in and out, narrow shifty eyes... kinda creepy.  I'd worry more about them than any Austrian Banks....  Don't worry, it's the mere crack of dawn and I got this shit covered, folks.  You're in good hands.

philipat's picture

From the Balance sheet, they have about 8 Billion in equity, which means their leverage is about 15X. Not bad for a European Bank. But of course if there is a run...........But even then, Draghi will do "Whatever it takes" or is this a major Buy-in??

Bastiat's picture

Yeah?  And what are the assets really worth?  What was that about equity?

philipat's picture

What are ANY Bank's "Assets" actually worth? Quite apart from the crap which is in SPV's etc and "Off Balance Sheet". It is impossible to know the true financial picture of any Bank by reading its Financial Statements, which is a very good reason not to invest in ANY Bank equities.

Bastiat's picture

Exactly.  Also the reason not to keep more than monthly transaction money in most of them.   

101 years and counting's picture

why arent futures up 100 this AM?  broken banks mean more bailouts, which means more printing and more fucking over the bottom 90%.....

fonzannoon's picture

The fed popped the biotech bubble. They deflated the social media bubble. They have been saying they are concerned about the reach for yield and people are complacent. Maybe they found a way to let this bank go under without risk of contagion or damaging the indexes. They get the side benefit of the lower yields in UST's and hopefully a lower Euro. In a week or so from now they can proclaim "Mission accomplished" again and we can blow through 2k SPY in earnest as they successfully popped the credit bubble.

alexcojones's picture

Why would you name a bank "Holy Spirit" or Spirit saint?

You're just asking for trouble.

And you got it.

knukles's picture

Sorta like some of the best nuclear reactors:  Turkey Point, Millstone and Diablo (Devils) Canyon


Karma. It's for real 
Penis is what's for dinner 
Serf's up!

Bastiat's picture

There were a couple banks back east that started calling themselves The Source and The One in their advertising, back in the 80s.  The fuckerz want you to think they are God.

HardlyZero's picture

Fiat allows hope for a time.

When fiat trust dies...

AccreditedEYE's picture

They will never ever allow the market to free fall. Yesterday should be remembered and used to help buy today. For all the "turmoil' in Europe, FTSE is only down 83 bps!!! They are setting you up to fall again if you are short.

morning's picture

Tyler, check their operation in Angola about to be nationalized. BESA.

morning's picture

Also, it's Portugal'slargest lender, not Spain's...


asscannon101's picture

'STABEELITEE, beetchez!'

Agent P's picture

How do you say "Cypress" in Portuguese? 

Agent P's picture

I guess I should learn the difference between a country that imposes depositor haircuts and a fucking tree! 

Curse you public education!!! 

Captain Willard's picture

There are only 10.5 million people in Portugal. Quick long division suggests this is a big mess. We can only assume that Cyprus-like deposit haircuts are on the way. 

It's been 40 years since the revolution in Portugal. I'd say we're right on schedule. The elites, like the Espirito Santo family, have totally screwed the average Portuguese. I cannot believe they continue to tolerate it. When the final story of self-dealing, crookery and political corruption is told, it will make interesting reading.

Now we know why Mr. Barroso has been such a zealous advocate for the EU over popular sovereignty.

morning's picture

Born, raised and living here since 1971.

The constitution has socialism inscribed in it.
All five parties are socialists.
People settle for nepotist crumbs i nexchange for oligo-power and a vote.

Birth rate is 7.9/thousand
Death rate is 10.2/thousand

Everyone loves the beach, cars, beer and all the singing tomorrows.

How could anything other than a clusterfuck ensue?

TabakLover's picture

Hey morn, how's  the real estate market?  My wife is dying to move to'll like this: she thinks the Portuguese men are the best looking in the world.

morning's picture

Your wife has a very sharp sense for business. As for the real estate market (sorry, couldn't resist) , it's seen a fair drop (demographics are awful and average wages are EUR /750 month) but it's got at least a 15% leeway down, IMHO. 

theminister's picture

Here's a little secret if you're interested in property...the "safest" most stable lender (backed by the fortitude of the State) Caixa Geral de Depósitos is neck-deep in bank/state owned properties that they can't get rid of. They have a "list" for properties in most major markets available if you know to ask.

Spungo's picture

Sure we could stop fucking around with other peoples' money, but where's the fun in that? I didn't becoming a banker so I could provide a valuable service to the country by securing deposits and providing startup capital to people with excellent business ideas.

alexcojones's picture

Hard to believe Portugal was once a world power.

Empire with fleet of ships.

But they did tie USA in the World Cup.

Two empires passing in the night. Neither learning from the other.

+1 Knuks on the Diablo name for a nuke site. And it sits right on a fault line too.

khakuda's picture

Expect central bankers fingers to be plugging hundreds of dykes in the years ahead.

John Law Lives's picture

Just give everyone in Portugal a few shares of CYNK apiece and kite it to the moon.  Problem solved.


o-antonio-maria's picture


Portugal is not "Spain's largest lender", but one important Spain's borrower. Angola is a bigger one though (I suppose)