terça-feira, 15 de julho de 2014

Espírito Santo family saga is unlikely to end happily / Financial Times


INSIDE BUSINESS July 14, 2014 7:04 pm
Espírito Santo family saga is unlikely to end happily

The ongoing saga at Portugal’s Banco Espírito Santo is a reminder of several facts: that banks in the eurozone periphery are still fragile; that investor sentiment toward them can still be volatile; and that taxpayer bailouts of troubled banks are no longer palatable for governments.
But the origins of the idiosyncratic BES affair also offer a more fundamental lesson: family-controlled banks can be problematic; but large, systemically important banks that are managed by family owners can be very problematic.
Unlike many rival lenders, Portugal’s biggest bank did not get into serious difficulties in the 2008 global meltdown – or even a couple of years later when the eurozone became the flashpoint of the crisis. The lender has come unstuck now because the complex interests of the extended Espírito Santo family have come back to haunt it.
The story is still unfolding but, in extremis, it could prove to be the sorry end of a proud dynasty. The lender’s foundations date back to the mid-19th century. Although it was nationalised by the state in the mid-1970s amid Portugal’s leftwing coup, the family returned from exile in Brazil in the 1980s, reacquiring and gradually rebuilding BES along the way. Until the weekend, a descendent, Ricardo Espírito Santo Silva Salgado, was the bank’s chief executive.
But the emergence of accounting irregularities at the Espírito Santos’ Luxembourg holding company prompted the central bank to intervene. It has ejected Mr Salgado and barred the family from further involvement in the management.
On Monday, after a margin call on a loan, the family sold a fifth of its 25 per cent stake.
BES’s ownership structure is not unique, of course. In some emerging markets, in parts of Latin America and Asia, big family-owned banks are the norm.
In many western markets, however, most family banks are now niche operators, typically focusing on activities that do not demand big balance sheets or a large appetite for risk. The Rothschild dynasty, whose banking interests are focused on advisory work, is the most notable example.
BES’s close neighbour, Spain’s Santander group, is a rare case of a globally relevant dynastic bank. It has been chaired for 105 years by a Botín – by Emilio I from 1909, by Emilio II from 1950 and, since 1986, by the current boss, Emilio III. Mr Botín’s daughter, Ana Patricia, who heads the group’s UK business, is widely expected to become the fourth generation in charge at some point. As at BES – at least until July 14 – the family commands several seats on the board, despite owning only a 2 per cent stake.
But Santander is a different beast from its neighbour. Despite the pressures on the group’s domestic economy in recent years, and weakened performance in other key markets such as Brazil and the UK, the group is in relatively robust health.
It has excelled where BES has not – thanks to its focus on banking and the expertise of its management. Santander also likes to stress the overarching benefit of a dynastic set-up – by passing the bank from generation to generation, it benefits from a long-term strategic vision.
Even so, Spain’s leading bank has faced persistent criticism for its stubborn habit of paying a generous dividend, even in lossmaking years, and for its lack of capital.
According to the critics, the family members’ own interests are distorting the bank’s balance sheet strategy – because they rely on dividends for a key part of their income, and do not want their holdings diluted in a capital raising.
And the potential for apparent conflicts of interest can be more serious still. In the case of BES, the alleged accounting irregularities at the family holding company follow financial pressure on some parts of the dynasty.
If there is a model for managing such tensions, it is probably Sweden’s SEB. The Wallenberg family has a 20 per cent stake in the bank. But it is held via its asset manager, Investor. The family patriarch, Marcus Wallenberg, is SEB’s chairman, but there is a professional chief executive and a broad and independent board. Another plus is that when Sweden went through its own financial crisis in the early 1990s, SEB was bailed out by the Wallenbergs, not the state.
Banks’ performance is driven by many factors. But, for the record, SEB’s shares have doubled over the past couple of years, outperforming rivals, particularly those with a less delineated family influence: Santander’s stock is up 43 per cent; BES’s is down 10, and falling.


Patrick Jenkins is the Financial Times’ financial editor

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