BANIF BOMBSHELL

With branches of Banif bank still being besieged by panicked customers on Wednesday, Portugal’s press has finally woken up to the fact that this is yet another national ‘banking disaster’ in which truth is being kept to a minimum. How could another bank – this time one with an €825 million State investment – be on the verge of collapse? Why didn’t regulators see this coming? As those who should have the answers choose their words very carefully, one thing is clear: taxpayers are almost certain to be left carrying the can.

“In five minutes, the prime minister repeated the same message six times,” wrote Público on Wednesday following an all-party two-and-a-half hour meeting the night before to discuss the escalating crisis.

“Client deposits at Banif are integrally protected, independent of their value,” said the paper, but “taxpayers could well be called upon to pay another bank bill the value of which he did not want to suggest”.

The message, as the so-called festive season arrives, at least drew a line in the sand of three days of speculation in which reports lurched from portents of full-blown gloom to platitudes that everything is fine and moving along nicely.

The truth, clearly, is that things are far from fine at Banif.

The Madeiran bank (full name Banco Internacional do Funchal) has just defaulted on a €125 million repayment to the Treasury, has lost 85% of its value in a year and, according to Expresso, owes around €825 million to the State.

In 2014 it reported a net loss of €295 million, and the year before losses stood at €470 million explains the Portuguese American Journal, adding that government restructuring plans have been “amended several times”.

Last Sunday a television report by TVI brought the litany of mismanagement to a head by announcing that the bank was on the point of implosion.

As customers began a stampede to Banif branches, removing everything from life savings to normal current accounts, news stories changed by the hour.

Banif’s executive president Jorge Tomé called TVI’s report “a nonsense” – saying the bank had “comfortable liquidity” and both customers and taxpayers “could rest assured” – and in the face of threats of legal action, TVI has since published an apology for what it now claims was a report that was “not totally precise”.

Meantime, Governor of the Bank of Portugal, Carlos Costa, has said that “in articulation with the Finance Ministry”, his institution is “accompanying the situation at Banif, guaranteeing the stability of the financial system, as well as the security of deposits”.

As Público remarks, it is all rather similar to assurances given before the “intervention” over Banco Espírito Santo – and no-one needs reminding how well that went.

Two large Spanish banks among possible buyers

Moving swiftly on to a slightly higher level of transparency, Jorge Tomé told RTP Madeira on Monday that there are “basically six international investors analysing Banif” and that by the end of the week, he expects to get proposals “from some of them” over the purchase of the government’s 60.5% shareholding.

Spain’s Expansion newspaper sheds some light on two of the potential buyers, suggesting they are “large Spanish banks”, while Bloomberg trots out the same names as the doomed short-listed contenders for Novo Banco: Apollo, Anbang and Fosun.

And this is where we arrive at a situation that contributed to the “Banif bombshell”: thanks to the Bank of Portugal’s determination to offload Novo Banco, Banif’s problems were relegated to the back burner.

BdP “wasted precious time” to resolve the crisis, claims Público
Público revealed on Tuesday that both the last finance minister and the governor of the BdP were alerted by Banif’s accountants PWC (Price Waterhouse Cooper) about the risks of leaving the bank’s problems to fester.

But other than “entering into shock” over the size the problems had reached, they did not act in time. In fact, it took Carlos Costa a month to get in touch with Jorge Tomé to say the latter had to find a new investor “as a matter of urgency” by the beginning of December.

Given the sudden radical deadline, it is no wonder TVI24 caught up with the story, and gave it a healthy, if unhelpful, dusting of sensationalism.

Deadline has a ‘sting in its tail’

As RTP diplomatically put it earlier this week, Banif is a “dossier that the government wants to resolve by the end of the year, before new European rules come in that could complicate the process”.

By complicate, RTP means that from January 1 bank collapses will have to be paid for by major shareholders and depositors – leaving the State (ergo, the taxpayer) with a massive bill and customers facing the kind of horrors witnessed by commercial paper holders in Group Espírito Santo.

Thus the pandemonium outside Banif branches, particularly in Madeira, is completely understandable, and all the authorities’ assurances that deposits are “integrally protected” should be prefaced with the time-frame: “until January 1”.

As one bank client told newspapers on Tuesday, “people aren’t taking any chances after BES”. Queues have been jostling to remove their money since Monday, with some Banif branches in Madeira staying open until 5pm (closing time is usually 3pm) to cope with the pressing demands.

Banif shares “bounce back” … to 0.0011 cents

Adding to the journalistic free-for-all over this story, Económico website has taken poetic licence the other way by describing a 37.5% ‘leap’ in Banif’s share price on Tuesday, 24 hours after the bank saw stock tumble in the aftermath of TVI’s report.

The good news was tempered nonetheless by the fact that shares now are each worth just 0.0011 cents, said the site.

However one interprets this latest banking fiasco, Christmas parties at both Banif and Bank of Portugal promise to be muted affairs as 2015 finally releases us from its fairly disastrous clutches.

natasha.donn@algarveresident.com

Photo: TIAGO PETINGA/LUSA