Original article by: Bloomberg
For Portugal, there’s a before and an after Banco Espirito Santo.
The fall from grace of one of the country’s oldest banking groups and the family that founded it has practically erased signs of its one-time dominance in the Iberian nation. Gone is the bank’s name glowing atop a building overlooking the Marques de Pombal square in central Lisbon as well as its logo on t-shirts of players from Portugal’s three-biggest soccer teams. Three years after the bank’s collapse, many in Portugal just want to move on.
In many ways, the group came to symbolize the excesses that drove Portugal to seek a bailout from its euro-area partners. Banco Espirito Santo collapsed under the weight of bad debts to companies held by the family-controlled Espirito Santo Group — whose name means Holy Spirit in Portuguese — and was rescued by the central bank’s Resolution Fund on Aug. 3, 2014.
As the assets and the name of what was once considered to be Portugal’s biggest banking dynasty disappear from the limelight, Ricardo Salgado, who was at the helm of the bank for more than two decades, is trying to salvage his family’s name and honor.
Salgado helped turn what began as a small currency exchange store in Lisbon in 1869 into Portugal’s biggest private lender. He oversaw the lender’s expansion into 25 countries as his family developed dozens of non-financial businesses ranging from a hotel chain in Portugal and Brazil to a farm on more than 135,000 hectares (333,000 acres) in Paraguay.
“He was like a prince,” said Joao Duque, a finance professor at the School of Economics and Management at the University of Lisbon. “Salgado spoke in a calm voice that projected confidence and security to everyone around him. He had everything he needed to succeed.”
That wasn’t enough to save the more-than 140-year-old Lisbon-based institution from collapse and near-oblivion.
Its name in Lisbon’s main square has been replaced by the letters of Novo Banco, the lender carved out of Banco Espirito Santo in its 4.9-billion-euro ($5.8 billion) rescue.
Portugal’s soccer teams have since turned to new sponsors such as Emirates Airlines. The Banco Espirito Santo brand, which according to Brand Finance was the most valuable among all the lenders in Lisbon’s PSI20 index in 2014, is today treated as a relic. A handful of keychains, calendars and other items with the BES logo can be found on sale for as much as 100 euros on Portuguese e-commerce store OLX.
Salgado mostly blames the Bank of Portugal for the demise of Banco Espirito Santo. He has been banned from working in the banking sector for 10 years and fined 4 million euros by the central bank for mismanagement, violating rules on conflicts of interest and providing false information.
“It was the Bank of Portugal’s resolution, along with the unusual decision to end the Espirito Santo name, that erased a brand with more than 140 years of existence from the facade of buildings,” Salgado, the great-grandson of the bank’s founder, said in an emailed response to questions in July. “If the goal was to destroy me, it wasn’t necessary to go that far.”
The 73-year-old now spends most of his days preparing his defense against a series of legal cases and writing his memoir. Salgado lives in an oceanfront villa in Cascais, a beach resort about 18 miles west of Lisbon.
“I’m fighting for the honor of being who I was and for the honor of my family,” he said.
The rest of the country has meanwhile bounced back from the depths hit during the crisis. The unemployment rate fell to 9 percent in June, the lowest since 2008, according to Eurostat. The economy will grow 2.5 percent this year after expanding 1.4 percent in 2016, according to the Bank of Portugal.
While lending to companies has yet to recover to levels prior to the Banco Espirito Santo bailout, mortgage and consumer loans are on the rise. New home loans increased fourfold to 728 million euros in May from the same month in 2014. New consumer credit rose 69 percent to 572 million euros in the same period, according to data compiled by the Bank of Portugal.
Novo Banco Sale
Portugal’s government has said it hopes to complete the sale of Novo Banco to U.S. private equity firm Lone Star by November. The proposed sale is set to turn the page on the biggest bank bailout in the country’s history. It will also mark the biggest disposal in the Espirito Santo empire since the banks-to-hotel group of companies fell apart in 2014.
“The sale would close an important chapter at a time when the financial sector in Portugal is looking better,” said Filipe Garcia, an economist at Oporto, northern Portugal-based financial consulting company IMF-Informacao de Mercados Financeiros SA. “But the deal isn’t closed yet.”
Most of the other Espirito Santo group assets have been sold off or are in the process of liquidation. In 2014, Apollo Global Management LLC agreed to buy insurer Companhia de Seguros Tranquilidade SA from Novo Banco. The following year, Banco Espirito Santo’s investment arm was sold to China’s Haitong Securities Co. and Thailand-based Minor International bought the group’s Tivoli Hotels & Resorts in Portugal and Brazil.
The sale of Herdade da Comporta, a beach and farming estate south of Lisbon that used to belong to the Espirito Santo family, is also close to completion, Pedro Almeida, a Portuguese investor who is interested in buying the fund that controls part of the estate, said last month.
Comporta became a refuge of the rich and famous after the Espirito Santo family bought the farmland in the 1950s and turned it into their summer retreat. The place is sometimes referred to as the Hamptons of Portugal, and regular visitors have included French shoe designer Christian Louboutin and, more recently, Madonna.
Back in Cascais, the beach resort near Lisbon, the former head of Banco Espirito Santo often attends Sunday mass in a chapel behind his pink-colored villa. He’s also been spotted at the nearby Hotel Palacio Estoril, a five-star hotel built in 1930 that attracted spies and members of European royal families during World War II.
“For all the mistakes we may have committed in the management of Banco Espirito Santo, I’m sure that the end didn’t have to be the way it was,” Salgado said. “What I can say is that I’m always very well treated on the street.”
— With assistance by Anabela Reis