Family heirloom

Paulo A. Azevedo and Alex Lee Banco Espirito Santo do Oriente (BESOR), headquartered in Macau, now renamed Novo Banco Asia (New Bank Asia), has a huge task ahead trying to recover from the collapse of its parent company in Portugal.
Victim of one of the biggest financial scandals in Portuguese history, due to the collapse of Banco Espírito Santo (BES) in Lisbon, a lack of confidence by Macau Government departments including from the banking regulator Macau Monetary Authority (AMCM), and an unsuccessful attempt to change its Governance Board, Novo Banco Asia is facing a “pre-break and was driving itself towards ungovernability”, sources told Business Daily newspaper.
Novo Banco Asia is now part of ‘Novo Banco’ following the split of what used to be BES in two (see other text in these pages).
Novo Banco Asia was owned almost in its entirety by BES and has been operating in Macau since 1995, where it primarily serves as a commercial and industrial bank.
From small and solid profits
to almost zero The last few years had seen a comfortable profit for Novo Banco Asia (former BESOR), which does not have any branches. It posted a net profit of MOP39.4 million in 2012 and MOP44.8 million in 2013. From its total income, it paid MOP5.4 million in taxes. The better performance was due to its corporate banking and trade finance segments.
But with the problems in Portugal the nightmare started for the Macanese institution, even if last June the president of the executive commission, José Morgado, told Business Daily that changes in BES were not going to affect Macau’s financial institution owned by the Portuguese group.
Quite the opposite has transpired: the bank has been strongly affected.
Results for 2014 “will show just a few patacas and Novo Banco will need to continue to inject money, some 30 to 50 million euros more, which we don’t know is possible since the Portuguese Central Bank might not allow it in the current situation”, our sources told this newspaper.
In recent months, Novo Banco sent over 40 million euros (MOP400 million) to Macau.
A strong blow to the aspirations of Novo Banco Asia to try to escape unharmed from the financial storm in Lisbon was given when three Macau institutions – the Monetary Authority, Social Security Fund and the Pension Fund – withdraw all their deposits, totalling around MOP4 billion (US$500 million), sources told Business Daily.
Yesterday, a member of the board from Novo Banco in Lisbon, who was in Macau for meetings and to reassure the market the bank has ridden the storm even if its image needs rebuilding, confirmed to this newspaper the money sent to Macau.
“But it was not a capital injection”, said Vítor Fernandes. “Just financial aid which is normal in similar situations”, he told us.
According to him, Novo Banco Asia has MOP200 million of social capital and over another MOP200 million “in accumulated results”.
Speaking to reporters recently, Macau Monetary Authority (AMCM) President Anselmo Teng Lin Seng said that the collapse of Portugal’s Banco Espírito Santo (BES) will in no way affect Macau. Teng commented that there was nothing for customers to worry about since assets of BESOR will become part of Novo Banco Asia. According to the media, Teng did not elaborate on whether the government bureaux or relevant public entities have had financial dealings with BES.?Several attempts by Business Daily to speak to Mr. Teng to explain, then, the need to withraw money from BESOR were consecutively rejected.
AMCM rejects new board BESOR’s new Governance Board is another “hot topic”. Last October, the bank’s General Assembly decided to change its Executive Commission.
Its leading man, José Morgado, was to step down and administrator Carlos Freire to retire.
From Lisbon arrived Paulo Franco and João Rato, from BES commercial and international areas, respectively. From Hong Kong, William Mok, a former executive with Macau’s troubled Delta Asia bank. However, AMCM seems unwilling to accept the changes. The regulator, who needs to approve the names, told BESOR on December 12 that it would not consider the new governance and advised the bank to maintain the old structure. A week later, on December 19, AMCM sent a more incisive letter signed by one of the regulators directors, William Vong, declaring that the bank should “withdraw the application for change of management”. The message couldn’t be more clear.
This week, now arrived in Macau a Vítor Fernandes, to “feel the pulse and find a way to dissipate any doubts related to the future of the bank and its commitment to its clients in Macau”, another source explained to Business Daily.
As far as this newspaper understands, José Morgado and Carlos Freire are to maintain their positions, while a third element is to join them in the Executive Counsil.
Vítor Fernandes, Novo Banco administrator and representative of Lisbon’s Resolution Fund, travelled to Macau to ensure a smooth path until the Portuguese Bank is bought by one of the 17 contenders, later this year.
“I do not comment on those matters of the bank’s governance, neither the past nor the future”, Vítor Fernandes told this newspaper. “What I can say is that the governance has always to have the natural agreement from the supervisory authorities”, he said.
Here to stay Business Daily newspaper sources say the transformation ratios (total of loans divided by total of deposits) is way above the 120% advised by the European Union. “It’s over 280 per cent”, we were told. Which means a “clear sign of alert”.
Vítor Fernandes and José Morgado play down these numbers, without confirming any percentage, saying it’s natural that those ratios go up when institutional investors withdraw their cash – in this case as a consequence of lack of confidence with the Lisbon situation – but everything will return to normal.
“Not only is the bank in Portugal solid but also the one here in Macau; both are institutions that protect well the resources that are entrusted to them and have a group of professionals that continue to give the best service to all their clients”, concluded Vítor Fernandes.
Expensive software BESOR Strategic Plan proved to be quite expensive and consumed most of the bank’s operational profits in 2014.
The changes on its new Atlas core system for its computers, from the previous Oracle system, cost more than MOP20 million. The new system, Business Daily sources say, created “innumerable errors”, with problems in areas such credit limits, contracts reversals, reporting, etc.
A high 40 per cent personnel rotation last year and its MOP5 million headquarters renovation will bring the last results in to “almost nothing”, sending “unwitting messages to outside that the bank is in trouble”, the sources say.
Once again, Vítor Fernandes sees no evil. Quite the opposite, he says. “I believe that those investments decided before the problem in Portugal last Summer were to face the predictable growth here in Macau”. Timing was far from ideal, he concedes, but “what we need to do now is to develop the bank to take advantage of the investment already made”.
Novo Banco Asia business in Asia: Specialised trade support: between Novo Banco areas and Asia, especially in China and Macau.
Networking and knowledge: Experienced professional team in the Asian market.
BESOR product and service offer includes: • Corporate Banking, through credit facilities supporting short-term as well as long-term investment activities
• Trade Finance, namely Letters of Credit (e.g.) issuing, confirmation, discount, etc. and documentary remittances ?
• Forfeiting
• Term deposits in several maturities and currencies, namely RMB
• Debt instruments placement
• Private Banking
• Companies internationalisation support in Asia