While reports of Banif’s demise might have been exaggerated, its woes are well-documented, stretching back to its government bailout in 2013 to the tune of around one billion euros.
Banif had agreed to repay the loan by 2017, but already missed a 125 million euro installment at the end of last year.
Question marks have been repeatedly raised over the ability of Banif to repay this debt or default on their obligations as was the case with BES. But the newly-appointed Socialist Government has moved to quell any fears that customers would bear the brunt of a repeat of mismanagement of their savings at a Portuguese financial institution.
Prime Minister António Costa, in a brief statement this week, said the government would safeguard savings, but was pessimistic over the odds of taxpayers being called upon to absorb any permanent losses the bank now looks likely to report.
But despite the prime minister’s attempts to ease any fears, hundreds of people queued outside branches of the bank this week with security vans being forced to make frequent stops to replenish depleted cash stocks.
There were also reports of some customers being mugged upon leaving the bank as thieves cashed in on the fears of many, especially the elderly who were concerned about losing their life savings.
The week started in ominous fashion for Banif, losing more than 35 percent of its share value in the first five minutes of trading on Monday morning, dropping to just nine hundredths of a euro cent.
The situation continued to deteriorate, with shares plummeting by 45 percent as news emerged of imminent government intervention to rescue the bank.
However, shares started to recover towards the end of the week, with values recuperating around 40 percent of earlier losses, moving up towards 0.015 cents.
Other media reports, in addition to that by TVI, which has landed them a law suit from Banif, suggested the bank’s toxic assets would be stripped away, much in the same fashion as took place with BES/Novo Banco.
The CEO of Banif, Jorge Tomé, also looked to allay growing fears this week, when he said that the bank had “comfortable liquidity” and guaranteed that “the depositors and tax payers could rest easy”.
In an interview on RTP-Madeira, Jorge Tomé said the possibility of the bank closing was “complete rubbish” and sent a message of confidence to the bank’s depositors.
“My message today is a message of serenity and tranquility for all the bank’s clients”, he said.
Jorge Tomé explained the planned sale of Banif was “going very well” and that there were six international investors analysing the bank’s situation.
According to Lusa News Agency, Tomé’s has however acknowledged that the news of a possible closure had “disturbed the entire restructuring process which was to sell the government’s stake in the company”.
The regional president of Madeira, Miguel Albuquerque has also come out to bemoan the bank’s current fortunes.
“The worst that could happen, after what happened with BES, would be to have the collapse of a bank that is much more important than its own position and is a life-line for the islands diaspora”, he was reported as saying by the Lusa.
Back in July, the European Commission opened an in-depth investigation to assess whether state aid granted by Portugal to Banco Internacional do Funchal was compatible with EU State aid rules.
In January 2013, the Commission temporarily approved state support of €1.1 billion to enable Banif to comply with capital requirements imposed by the Portuguese banking regulator.
A final decision on the compatibility of the support measures requires the Portuguese authorities to propose and the Commission to approve adequate restructuring measures for Banif.
Portugal this year submitted a restructuring plan for Banif, which was amended several times.
The Commission has expressed concerns whether the measures meet the requirements under these rules, which aim to restore the long-term viability of the bank and ensure that the use of taxpayer money is limited to the minimum necessary to achieve this result.
They also require that the bank and its owners contribute sufficiently to the cost of the restructuring and that distortions of competition brought about by the subsidies are limited.
The Commission said it has been investigating further to see whether its concerns are justified, but with the latest debacle, this is now reason for alarm bells to ring even louder in Brussels.
Late last week, international ratings agency Fitch said in a statement that Portugal’s banks are stabilising, perhaps unaware of the confusion that would strike the Portuguese banking system in the ensuing days.
“There are signs that key bank asset quality and capital adequacy metrics could begin to improve,” Fitch said, adding that the sector “continues to act as a drag on sector profitability and solvency.”
Fitch added that Portugal could “expect moderate improvements in sector performance in 2016 but profitability will remain subdued, held down by low interest rates and continued deleveraging, despite signs that credit flows are improving in recent months.”
“We also think that potential contingent risks for the rest of the banking sector arising from the sale process [of Novo Banco] have been reduced because we understand that any required contributions to the Resolution Fund can be staggered over several years.”
In the meantime, Banif’s website, www.banif.pt has been struggling to cope, and has spent much of the week down, which is thought to be due to heavy traffic.