14 Jul 2014
Portugal's Banco Espirito Santo woes shouldn't lead to contagion - Deutsche Bank
FXStreet (Łódź) - Jim Reid from Deutsche Bank believes that whilst Europe still has major medium-long term problems, the Banco Espirito Santo situation shouldn't be a catalyst for an imminent escalation of traumas in the continent.
Key quotes
"The problem corporate structure in question is a fairly unusual and unique one and the financial irregularities uncovered likely make this an isolated one-off. However sentiment is likely to be dented by this and scrutiny will likely be placed on banks with more opaque structures."
"In terms of the impact of the situation on the sovereign, DB’s Gilles Moec thinks that a bailout of BES, if required, would be within the financial capacity of the Portuguese sovereign, unless significant risks beyond the exposure to the Espirito Santo family and BES’ subsidiary in Angola materialise."
"Based on bond issuance from the Portuguese sovereign since January, the sovereign can deal with redemptions and deficit funding without accessing the market for the remainder of this year."
"In addition, slightly more than half (EUR6.4bn) of the EUR 12bn of the Troika program earmarked for bank recapitalisation was left untouched and available to the government, counting towards the EUR 15.3bn cash position of the government at the of 2013."
"In other words, Gilles thinks that - unless bigger 'holes' emerge either on BES specifically or Portuguese banks in general (eg from the ECB's stress-tests/AQR results) - a bailout is unlikely to create massive tension on the sovereign's financing capacity."
Key quotes
"The problem corporate structure in question is a fairly unusual and unique one and the financial irregularities uncovered likely make this an isolated one-off. However sentiment is likely to be dented by this and scrutiny will likely be placed on banks with more opaque structures."
"In terms of the impact of the situation on the sovereign, DB’s Gilles Moec thinks that a bailout of BES, if required, would be within the financial capacity of the Portuguese sovereign, unless significant risks beyond the exposure to the Espirito Santo family and BES’ subsidiary in Angola materialise."
"Based on bond issuance from the Portuguese sovereign since January, the sovereign can deal with redemptions and deficit funding without accessing the market for the remainder of this year."
"In addition, slightly more than half (EUR6.4bn) of the EUR 12bn of the Troika program earmarked for bank recapitalisation was left untouched and available to the government, counting towards the EUR 15.3bn cash position of the government at the of 2013."
"In other words, Gilles thinks that - unless bigger 'holes' emerge either on BES specifically or Portuguese banks in general (eg from the ECB's stress-tests/AQR results) - a bailout is unlikely to create massive tension on the sovereign's financing capacity."