Espirito Santo Declines on Risk Disclosure: Lisbon Mover

Espirito Santo Financial Group SA, the largest shareholder in Portugal’s second-biggest publicly traded bank, dropped as much as 10 percent in Lisbon trading after saying its “exposure” to Grupo Espirito Santo increased.

The shares fell 5.2 percent to close at 1.57 euros in Lisbon trading.

The amount ESFG is owed by ESI and Rioforte, two holdings of Grupo Espirito Santo, rose to 2.35 billion euros ($3.2 billion) at the end of the second quarter from 1.37 billion euros in December, the company said in a filing yesterday. ESFG is the biggest shareholder in Banco Espirito Santo, which held its second rights offering in two years last month and is part of Grupo Espirito Santo.

The disclosure “reinforces the impression that ESFG is being sucked into the problems of the group,” Roger Francis, a credit analyst at Mizuho International Plc in London, said in e-mailed comments today.

ESFG included a 700 million-euro provision in its 2013 accounts related to potential risks associated with Grupo Espirito Santo. ESFG, based in Luxembourg and Lisbon, has a 25 percent stake in Banco Espirito Santo.

Banco Espirito Santo shares gained 8.2 percent to 0.752 euros after newspaper Expresso reported today Vitor Bento, chairman of payment-processing company SIBS, had been invited by ESFG and Credit Agricole SA, one of the bank’s biggest shareholders, to become the new CEO at Banco Espirito Santo. A spokesman for Banco Espirito Santo and Bento weren’t immediately available to comment on the report.

ESFG on June 20 proposed Chief Financial Officer Amilcar Morais Pires to replace Ricardo Salgado as CEO, a proposal to be voted on in a shareholder meeting on July 31.

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