Following yesterday’s peripheral European poundage over fears of what a Banco Espirito Santo failure could mean to the nation, and to the Eurozone, but most importantly to depositor confidence everywhere, today has been an epic damage control session, with one sellside penguin after another, most notably Goldman (which until hours ago had the cratering bank at a Buy rating, only to switch to Neutral this morning), rushing to release half-baked notes promising that “all is well, please to keep calm” and that nobody should certainly withdraw their deposits from insolvent European banks. This is happening after Banco Espirito Santo itself sought to reassure investors by revealing its exposure to related companies after a missed payment on short-term debt by a member of the Portuguese group roiled global markets.
As Bloomberg reported “the nation’s second-biggest bank by market value said it had 1.18 billion euros ($1.6 billion) of loans, securities and other items linked to Grupo Espirito Santo as of June 30, according to a filing. The lender also said that it has a buffer of 2.1 billion euros above the regulatory minimum following a capital increase in June.” Considering the obscurity of disclosures at the linked entities one would not be surprised if all the revealed numbers this morning are nothing more than yet another fabrication.
This clown parade of clueless opinions (did we mention Goldman had BES at a Buy until this morning?), stretched all the way to the very top with Bank of Portugal itself issuing the following pearl:
- BANK OF PORTUGAL SAYS BES DEPOSITORS CAN STAY CALM
Uhhh, what else would the Portugal central bank say? Panic and withdraw your deposits from a bank whose exposures to insolvent entities have been largely unknown until today (and even now).
So in an environment in which everyone had done all they could to preserve confidence in the system, moments ago BES resumed trading. In retrospect perhaps that decision was a little rash as after soaring over 10% out of the gates, the stock has since tumbled. It remains to be seen if the BIS and ECB, aka Europe’s BTFD crew, can contain the damage since confidence appears to not have been restored after all.
