Espirito Santo Buying Longer Maturities of Portuguese Debt
Banco Espirito Santo SA (BES), Portugal’s biggest publicly traded bank, is “slowly” buying longer maturities of the country’s bonds in secondary markets and doesn’t expect a debt restructuring, Chief Executive Officer Ricardo Salgado said.
“We are changing our strategy a little bit,” Salgado said today in an interview. “I believe that our yield curve will move towards the Irish one. We are slowly buying longer maturities. We have 3 billion euros ($3.9 billion) in exposure to Portuguese sovereign debt, and now we are moving to two- thirds short term and one-third around 5 years.”
Portugal hasn’t sold bonds since it followed Greece and Ireland in getting a European Union-led financial rescue last year. The country’s aid plan assumes it will regain access to medium- and long-term sovereign-debt markets by late 2013.
The country’s debt agency has continued to sell treasury bills, which Espirito Santo is also buying, according to Salgado.
“We are market makers and we are always present at auctions,” the CEO said.
The European Central Bank approved on Feb. 9 the temporary use of additional collateral in funding operations by seven euro-area members’ central banks including Portugal. It offered unlimited loans of up to three years against eligible collateral on Feb. 28 that can be used to finance purchases of assets including higher-yielding government debt.
Espirito Santo borrowed 5 billion euros in loans from the ECB last week, Salgado said.
“We are taking advantage of the three-year LTRO facility, which is extremely interesting for consolidating debt in better conditions,” he said.
The Portuguese bank is seeing lower demand for loans in the country amid the recession, Salgado said. The economy will contract 3.3 percent this year, the European Commission forecast on Feb. 23.
“We are lending in spite of the deleveraging program,” Salgado said. Portuguese banks have to meet a target of lowering their loan-to-deposit ratios to 120 percent at the end of 2014.
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