UPDATE: Portugal's Banks Face Estimated EUR6.95 Billion Shortfall-EBA
December 08 2011 - 3:00PM
Dow Jones News
Portugal's banks are facing a combined shortfall of EUR6.95
billion in meeting the European Banking Authority's
recapitalization target, EBA data provided by Portugal's Central
Bank showed Thursday, although some have already taken measures to
close the gap.
The announcements are part of a "capital exercise" under which
71 European banks have to demonstrate they are adequately
capitalized, even in the context of the current stressed market
conditions for sovereign debt. The banks were asked to unveil
whether they are on track to meet the EBA's recapitalization plan,
which requires banks to maintain a Core Tier 1 capital ratio of 9%
after adjusting the values of their government bond portfolios to
reflect market prices.
As of September-end, four of Portugal's largest banks reported
shortfalls: Banco Comercial Portugues SA (BCP.LB) faced a EUR2.13
billion shortfall; Banco BPI SA (BPI.LB) a EUR1.389 billion
shortfall; Espirito Santo Financial Group SA, the holding company
of Banco Espirito Santo SA (BES.LB), a EUR1.597 billion shortfall;
and state-owned Caixa Geral de Depositos SA a EUR1.834 billion
shortfall.
Espirito Santo Financial Group also reported a separate
shortfall for its banking unit of EUR810 million, which allows for
better comparison with its peers. That figure was included in the
group's EUR1.597 billion total.
The country's total shortfall is down from a combined EUR7.8
billion capitalization shortfall reported when the capital exercise
was last completed in October.
Two banks have taken action to reduce their shortfalls further
since the latest test was carried out. BCP said it raised its Core
Tier 1 ratio by EUR405 million on Oct. 13 through a share swap that
reduced its shortfall to EUR1.725 billion compared with EUR2.4
billion when the exercise was last carried out.
Meanwhile, Banco Espirito Santo said it has reduced its EUR810
million shortfall, a subset of the holding company's total, to
EUR188 million following a share offer Dec. 5 that allowed it to
increase its Core Tier 1 ratio by EUR622 million.
BPI and Caixa Geral de Depositos also reduced their
capitalization shortfalls from previous levels of EUR1.72 billion
and EUR2.24 billion, respectively, when the exercise was last
carried out.
BCP and BPI both said they will consider the best way of
covering the shortfall ahead of EBA's June 2012 deadline, including
tapping a EUR12 billion fund made available to banks under
Portugal's EUR78 billion bailout program.
BES, ESFG and CGD also said they are committed to meeting the
June 2012 deadline, although the latter two didn't outline any
capital-raising plans. The state-owned bank CGD isn't allowed to
tap the bank lines provided under the bailout.
Banks across Europe are required to submit proposals outlining
their plans to meet the EBA's capital requirements by Jan. 20,
2012.
Bank recapitalization is one element of a multiple-part effort
to restore confidence in the credit of Europe's banks and
sovereigns.
-By Alex MacDonald, Dow Jones Newswires; +44 (00207 842 9328;
alex.macdonald@dowjones.com