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BESPL: Back To Business As Usual?

04 December 2014 by lberuti

As one can see on this grapple, 2014 has not been a walk in the park for BESPL’s (formerly Banco Espirito Santo and now Novo Banco S.A.) investors. Despite a brief but intense scare at the end of July, people who were owning Banco Espirito Santo’s senior risk escaped the punishment that was imposed on shareholders who lost everything. But still, the risk premium was on the rise during the summer and stable at best since October. The market had to wait until today, for Novo Banco to release their first balance sheet as of the 4th August. And numbers actually came in better than the street anticipated. Their Common Equity Tier 1 ratio, a measure of how well a bank can absorb losses, was 9.2% against expectation of 8.5%. After an initial collapse of customers’ deposits from €36bln to €25bln, the management announced that they have now recovered more than €2bln of deposits in 2 months. On the flip side, the NPL ratio has increased, but overall these numbers were received positively and people begun to question why the 5 year CDS was trading in excess of 500bps. The protection was remarked aggressively tighter, all the way down to 387bps from 497bps. The next step of the normalisation would be have a steep curve, as it is still currently deeply inverted on the short end.