Portuguese Banks Drop on Political Uncertainty: Lisbon Mover

Banco Comercial Portugues SA and Banco BPI SA led Portuguese banks lower as analysts said the nation’s political crisis will persist, generating uncertainty about the country’s ability to exit its aid program.

President Anibal Cavaco Silva said last night that early elections are undesirable and urged the ruling coalition parties and the main opposition to reach a “national salvation” pact allowing Portugal to complete its aid program, set a date for a vote and ensure that the country’s debt load will eventually be sustainable with a new government.

The governing Social Democrat and CDS parties said they had reached an agreement last week to overcome a rift caused by the resignation of Foreign Minister Paulo Portas. Cavaco last night stopped short of approving the government’s proposed reshuffle, and urged the country’s main political parties to reach a larger agreement.

“The political crisis in Portugal is far from over,” economists including Giada Giani at Citigroup Inc. said in a note to clients. “Despite the efforts of Prime Minister Passos Coelho to recompose the fracture within the government coalition, the president’s proposal is likely to keep political uncertainty high in coming weeks.”

‘Under Pressure’

Banco Comercial, Portugal’s biggest non-state-owned bank by assets, declined 7.5 percent to 8.6 euro cents in Lisbon trading. Banco BPI SA, Portugal’s fourth-biggest bank, dropped

6.5 percent to 85.7 cents. Both lenders received bailout funds from the Portuguese government.

Banco Espirito Santo SA, the nation’s second-biggest non-state-owned bank, decreased 4.9 percent to 59.6 euro cents. Banif SA which also received state aid, tumbled 13 percent to

5.2 cents.

“The banking sector should be under pressure,” Tiago Anjos, an analyst at Oporto-based BPI, said in a note to clients. “Even though a potential agreement between PSD, CDS and PS could improve political stability in the medium term, in the short term the President’s decision should increase uncertainty.”

Portas tendered his resignation as foreign-affairs minister on July 2 in a row over budget policy with the prime minister. Coelho, whose finance minister, Vitor Gaspar, quit the day before, refused to accept the resignation, citing Portas’s key role in the coalition.

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