LISBON, Portugal (AP) - The woes of troubled Portuguese bank Banco Espirito Santo deepened Thursday as its share price plunged on the Lisbon stock exchange, a day after it reported a record half-year loss of 3.58 billion euros ($4.8 billion).
LISBON, Portugal (AP) — The woes of troubled Portuguese bank Banco Espirito Santo deepened Thursday as its share price plunged on the Lisbon stock exchange, a day after it reported a record half-year loss of 3.58 billion euros ($4.8 billion).
The stock sank in a daylong sell-off, dropping by 42 percent to 0.20 euros on the Lisbon stock exchange. The bank's share price four months ago, when problems first emerged, was around 1.3 euros.
The fall began after an audit in May discovered accounting irregularities at the bank's parent company. The drop gathered momentum in recent weeks after three of the Espirito Santo family's holding companies requested bankruptcy protection. Police suspect the former chief executive, Espirito Santo family patriarch Ricardo Salgado, of fraud, money-laundering and forgery. Police searched the Lisbon head office of the Espirito Santo's non-financial holding company Rioforte on Wednesday.
The bank's new board said its recovery plan will include a recapitalization and sale of non-strategic assets. Portuguese officials have indicated private investors are standing by to invest in the bank, but the surprising size of its losses could force Banco Espirito Santo to seek government help, too. The government says it has 6.4 billion euros available to recapitalize the bank if necessary. The bank's leverage ratio is now 5 percent — below the minimum 7 percent demanded by the Bank of Portugal.
After the losses were announced, the Bank of Portugal stripped the Espirito Santo family's holding company of its voting rights at the bank. It also suspended the three board members in charge of supervision, auditing and risk management, after auditors discovered a 1.5 billion-euro black hole in mid-July.
The half-year results suggested illegal activity had taken place at Banco Espirito Santo, the central bank said in a statement. The regulator has already ordered a forensic audit of the bank which could be used for a prosecution.