The rebuilding of Portugal's Novo Banco - the successor to Banco Espirito Santo (BES) after a state rescue last month - was dealt a blow on Saturday with the resignation of the three men handpicked by the central bank in July to turn BES round. Chief executive Vitor Bento, finance director Joao Moreira Rato and deputy CEO Jose Honorio said they were leaving because their initial mandate to revive the bank with private money had changed too much since the government bailout.
BES had to be rescued after the collapse of the business empire of its founding Espirito Santo family, whose main holding firms are under creditor protection. The management resignations followed a reported disagreement with the central bank over Novo Banco's long-term strategy. However, the three men denied any conflict. "Our decision to resign is due to the fact that our mandate significantly changed since we began our roles, in mid-July. During our time at Novo Banco, we have contributed to the stabilisation of the bank, taken steps to normalise operations and improve systems and launched a medium-term plan," they said in a joint statement.
Bento's initial mandate was to save BES using private capital, before the central bank decided on August 3 to step in with 4.9 billion euros ($6.4 billion), mostly in public funds from the country's bailout, to recapitalise the "good bank" Novo Banco that it carved out of the troubled BES.
Weekly newspaper Expresso said earlier the executives objected to the central bank's plan to sell Novo Banco as soon as possible and were reluctant "to run a project that is not theirs". "A process for a swift sale of the bank has already been launched and is being managed by the Resolution Fund and the Bank of Portugal. We now feel that the right thing to do is to hand over the reins to another management team," Bento said.
Expresso said the executives had offered to resign previously as they were against the central bank-ordered split of BES into a good bank that is now Novo Banco, and a bad bank that inherited the exposure to the Espirito Santos' troubled web of businesses. Bento said he and his team believed Novo Banco was "a great institution, with dedicated people, loyal customers and a business that can strongly contribute to lead Portugal through the recovery."
Bento said his early announcement of his intention to resign gave time to prepare a smooth transition to new management. Bank of Portugal officials were not immediately available to comment, but local media said the regulator was likely to announce Bento's replacement this weekend.
Bento, a respected economist and business manager, was picked by Bank of Portugal Governor Carlos Costa to replace Ricardo Salgado, the patriarch of the Espirito Santo clan that founded the bank some 150 years ago. Salgado had resigned under pressure from Costa. Bento's new management and the Bank of Portugal have said they suspect illegal activity took place at BES, involving the financing of the troubled family businesses using money borrowed from BES clients.
The Bank of Portugal and the government arranged 3.9 billion euros in public funds from the country's international bailout for Novo Banco and they want to sell the lender to recover the loans. BES and Novo Banco have already encountered difficulties as they try to recover some of the Espirito Santo family's massive debts, with some investors and a family holding company trying to block the sale of insurer Tranquilidade. Earlier this month, auditor KPMG warned of possible further losses on top of a huge 3.6 billion euro loss reported by BES in July.
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