A potential exit by Greece from the euro, even if it leads to a run on European banks, would not bring down Portugal’s banking system, the chief executive of Portugal’s largest publicly listed bank told CNBC on Wednesday.
“Greece has nothing to do with us,” Ricardo Salgado, chief executive of Banco Espirito Santo,
told "Squawk Box" in an interview.
“They are in the extreme east of Europe, we are in the extreme west turning to the Atlantic region, turning to south Atlantic countries, most of them speaking Portuguese such as Brazil and in Africa Mozambique,” Salgado added.
He said Banco Espirito Santo had enough core 1 tier capital to prevent a run on the bank leading to its collapse.
And he defended the Portuguese economy telling CNBC the country’s exports were “doing extremely well” and had been “extremely resilient”, adding it had performed better than the economies of Spain, Italy, Holland and the UK in the last quarter.
Salgado’s comments came as the bank announced a decline in first quarter profit of 84 percent to 11.6 million euros ($14.7 million) missing analysts’ expectations significantly.
The bank also reported that bad debt provisions had increased by 86 percent amid what it called “recessionary conditions in the Portuguese economy.” On the plus side however net interest income increased by 8.6 percent, which Salgado said had come from short-term loans to corporates and small to medium sized enterprises.
Explaining the increase in bad load provisions he said: “We have to provide according to the imperative and it’s a moment for safety and soundness of the banking sector…it’s a moment to provide for and strengthen the financial condition of the bank instead of showing good results.” Salgado added that the economic situation in Portugal’s neighbor Spain had a far greater impact on the Portuguese economy that than of Greece.
“Much more important for Portugal than Greece is Spain and I believe in Greece is it a political issue and it has to be solved and European countries have to be prepared to face that,” he said.
He said Spain was in a good position to turn its economic difficulties around and avoid a bailout, pointing to the country’s industrial and agricultural sectors, which he said were often overlooked but remained strong.
While he criticized the merger of Spain’s mutual sector with the banking sector in the last decade he said the country’s private banking sector was healthy and that Spain also had a much smaller amount of public indebtedness than some of its European partners including Germany and France.