Banco Espírito Santo History and Operations Explained

Banco Espírito Santo was founded in 1869 by António da Silva Porto. It was initially a small bank that catered to the needs of the local community.

The bank's early success can be attributed to its strong focus on customer service and its commitment to providing innovative financial solutions. Banco Espírito Santo's reputation as a reliable and trustworthy bank grew rapidly.

Banco Espírito Santo's operations expanded significantly in the early 20th century, with the bank establishing a presence in several countries in Europe and South America.

Banco Espírito Santo was founded in 1869 in Lisbon, Portugal by António da Silva Porto.

The bank's early years were marked by a series of mergers and acquisitions, including the merger with Banco Nacional Ultramarino in 1896.

The bank's expansion continued in the 20th century, with the opening of new branches and the introduction of new financial services.

By the 1990s, Banco Espírito Santo had established itself as one of the largest banks in Portugal, with a significant presence in the country's financial sector.

The bank's success was due in part to its conservative approach to banking, which allowed it to weather the financial crises of the 20th century.

In 2012, Banco Espírito Santo was the only one of the three major private Portuguese banks to increase its capital without relying on taxpayers' money, instead using only its shareholders and the capital markets.

The bank's leadership under Ricardo Salgado successfully navigated a challenging time for Portugal, as it was the only Portuguese bank to manage the operation that marked the country's return to markets in January 2013.

Banco Espírito Santo's capital increase in June 2014 was a major success, with over 150 institutional investors participating and resulting in a 178% higher demand than the available offer.

Internationalization is a crucial aspect of bank operations, especially for businesses with global reach.

In fact, 70% of the world's trade is done through international transactions, making it essential for banks to have a strong international presence.

To expand globally, banks must comply with foreign regulations and laws, which can be a complex and time-consuming process.

This can involve obtaining licenses and permits, as well as adapting to different cultural and linguistic requirements.

For example, banks may need to open subsidiaries or branches in foreign countries to provide services to local customers.

According to a study, 60% of banks have a presence in at least three countries, highlighting the importance of internationalization in the banking sector.

Banks must also consider the risks associated with international transactions, such as currency fluctuations and exchange rate risks.

To mitigate these risks, banks use various tools and techniques, including hedging and risk management strategies.

In 2012, the bank led by Ricardo Salgado was the only one of the three major private Portuguese banks to increase capital by relying solely on shareholders and the capital market, without using taxpayer money.

This approach was notable, as many banks were struggling financially at the time.

The bank's ability to raise capital without government assistance was a testament to its financial health.

The BES was also the only Portuguese bank to manage the operation that marked Portugal's return to the markets in January 2013, following the country's intervention by the troika.

This was a significant achievement, demonstrating the bank's expertise in managing complex financial transactions.

In June 2014, the BES conducted a capital increase operation, which Ricardo Salgado considered the most successful since the bank's privatization in 1992, attracting around 150 institutional investors and resulting in a 178% higher demand than the available offer.

The Banco Espírito Santo faced a severe crisis in 2014, which led to its eventual resolution. The bank's president at the time, Ricardo Salgado, was forced to resign in July 2014 after an external audit revealed significant irregularities in the bank's accounts, including a pre-loss of €3.577 million in the first half of 2014.

The crisis was exacerbated by the bank's high exposure to risk, with 73.4% of its financing going to corporate clients, who had a higher default rate than individual clients. The bank's credit risk represented 11.1% of its total portfolio at the end of March 2014.

The bank's situation worsened in July 2014, when its stock price plummeted by over 80% in just two days, and the European Central Bank suspended the bank's access to monetary policy operations, requiring it to repay €10 billion in three days.

The bank's poor management was further highlighted by an investigation that found the bank's administration, led by Ricardo Salgado, had disobeyed the Bank of Portugal 21 times between December 2013 and July 2014, engaging in "acts of dolous management ruin."

The bank's resolution was finalized on August 3, 2014, when the Bank of Portugal announced a €4.9 billion bailout from the Fundo de Resolução, which would create a new bank, Novo Banco, and transfer the bank's non-toxic assets to it. The bank's toxic assets would remain with the old BES.

Here are the key players involved in the resolution:

The Crise de 2000, or 2000 crisis, was a pivotal moment in the history of the Banco Espírito Santo. Ricardo Esprito Santo Salgado's management of the bank's association with the Crédito Agrícola was disastrous, inflicting a huge loss on Brazilian investors in the funds managed by BES Distribuidora de Títulos e Valores Mobiliários.

In 1999, the Real's devaluation led to a situation where only 3 institutions administering funds in Brazil incurred losses for their investors. The Banco Marka and Fonte Cidam paid all their investors, but the BES, through its subsidiary Banco Boavista, committed a crime against the economy. This was confirmed by the bank's president at the time, who stated that the bank protected its own resources before those of its clients.

The BES's actions led to a scandal, with processes initiated by the Polícia Federal, Banco Central, and Ministério da Fazenda. However, the bank's president and the bank's administrators escaped punishment, and the bank was eventually sold to the Banco Bradesco, effectively abating the crisis.

The Medida de Resolução of the Banco de Portugal was a crucial step in addressing the bank crisis.

On August 3, 2014, the Banco de Portugal announced a rescue package worth 4.9 billion euros, which was funded by the Fundo de Resolução, a state-backed fund.

The rescue package was used to transfer the healthy assets of the BES to a new bank, Novo Banco, while leaving the toxic assets behind.

The Novo Banco was established with a new administration, and the Fundo de Resolução became its sole shareholder.

The BES was excluded from the PSI-20 index on August 4, 2014, and an audit later revealed that the bank's management had engaged in "acts of ruinous management" that harmed depositors, investors, and creditors.

The BES's management, led by Ricardo Salgado, was found to have disobeyed the Banco de Portugal 21 times between December 2013 and July 2014, practicing "dolous acts of ruinous management".

The Banco Central Europeu (BCE) withdrew the BES's status as a counterparty, suspending its access to monetary policy operations.

The BES was eventually liquidated on July 13, 2016, after the BCE withdrew its authorization, and a liquidation commission was established.

Here is a brief timeline of the key events:

The resolution of the BES bank crisis was a complex and challenging process, but it ultimately led to the establishment of a new bank, Novo Banco, and the protection of depositors' funds.

Banco Espírito Santo's financial woes had a significant impact on the Portuguese economy.

The bank's collapse led to a 7.9% decline in Portugal's GDP in 2014.

The bank's financial troubles also had a ripple effect on the country's stock market, with the PSI 20 index plummeting by 15.6% in 2014.

The bank's assets had shrunk by 35% between 2012 and 2014, a clear indication of its financial struggles.

The bank's debt-to-equity ratio had increased to 2.4 times by 2014, a significant concern for investors.

The bank's financial struggles ultimately led to the resignation of its CEO, Ricardo Salgado, in 2014.

The bank's financial woes resulted in a significant loss for its shareholders, with the bank's stock price plummeting by 90% between 2012 and 2014.

Banco Espírito Santo has a significant presence in the European stock market, specifically in Portugal and Luxembourg.

The bank was listed on the Euronext Lisbon stock exchange in 1994.

Banco Espírito Santo's shares are also traded on the Luxembourg Stock Exchange.

The bank's shares are widely held by institutional investors, including foreign investors.

In 2014, the bank had a market capitalization of around €4.5 billion.