Espírito Santo Financial Group S.A.

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Espírito Santo Financial Group S.A.

231 Val des Bons Malades
Luxembourg, L-2121
Telephone: +(442) 073324350
Fax: +(442)073324355
Web site:

Public Company
1869 as Caza de Cambio
Employees: 10,127
Total Assets: EUR 71.76 billion ($95 billion) (2006)
Stock Exchanges: New York
Ticker Symbol: ESF
NAIC: 522110 Commercial Banking; 551112 Offices of Other Holding Companies

Espírito Santo Financial Group S.A. is the Luxembourg-based holding company for the banking and insurance operations controlled by the Espírito Santo family. These operations focus primarily on the Portuguese market, especially through the Banco Espírito Santo (BES) and the Tranquilidade insurance group. BES is the third largest commercial bank in Portugal (and the second largest bank not owned by the Portuguese government). BES's operations include investment banking through BES Investimento, and fund management through ESAFEspírito Santo Activos Financeiros. Espírito Santo also operates banking subsidiaries, directly or through BES, in several foreign markets, including Spain, France, Switzerland, Panama, Brazil, the Cayman Islands, the United States (in Florida), and in China and Angola. The company's insurance operations center on Companhia Seguros Tranquilidade, a nonlife, brokerage-based insurance group; Espírito Santo Seguros, which offers nonlife bancassurance products through BES; and Companhia de Seguros Tranquilidade Vida, which offers life insurance products in a bancassurance relationship with BES. In February 2006, Espírito Santo agreed to transfer half of its ownership of its bancassurance subsidiaries to longtime financial partner Credit Agricole, of France. Espírito Santo Financial Group is listed on the New York Stock Exchange. Ricardo Espírito Santo Silva Salgado serves as group president and chairman, and Jose Manuel Espírito Santo Silva serves as vice-chairman. In 2005, Espírito Santo posted total assets of EUR 71.76 billion ($95 billion).


The Espírito Santo (the name means "holy spirit") family's banking odyssey began during the late 19th century, when patriarch José Maria de Espírito Santo Silva set up a foreign exchange agency, Caza de Cambio, in Lisbon in 1869. Espírito Santo also acted as an agent for international and domestic credit bonds. Espírito Santo's major business, however, was as a sales agent for lottery tickets, and particularly for the distribution of Spanish lottery tickets in Portugal. Espírito Santo's success led him to move to larger quarters in the center of Lisbon in 1880.

The move inspired Espírito Santo to enter the banking sector proper. Starting in 1884, he formed a number of banking and credit title agency partnerships, which ultimately led to the establishment of the Beirao, Pinto, Silva and Co. partnership in Lisbon. Espírito Santo gained control of the partnership in 1911, changing its name to JM Espírito Santo Silva & Ca. in 1915. After Espírito Santo's death that year, the company was taken over by his family and other shareholders. The bank was placed under the leadership of eldest son José Ribeiro do Espírito Santo e Silva and in 1918 the family changed the institution's name to Espírito Santo Silva and Banco Co. The bank was formally incorporated as Banco Espírito Santo (BES) in 1920.

BES launched a new phase of its growth, opening its first branch office in Torres Vedras in 1920. The following year, the bank opened a second branch, in Porto. Although the first two decades of the 20th century were a period of great political upheaval, during which time Portugal haltingly shifted via revolution from a monarchical form of government to a republican regime, the period between the two world wars was one of dramatic growth in Portugal's banking industry. The group continued to grow through the 1920s and into the 1930s, despite the harsh economic climate of the time, and by 1937 already operated some 13 branch offices.

By then, José Maria's eldest son, José Ribeiro do Espírito Santo e Silva, had been expelled from the Catholic country for getting a divorce in 1931. In his place, younger brother Ricardo defied the global depression of the 1930s to build a European banking empire. He found a willing supporter in Antonio de Oliveira Salazar, the prime minister who founded the "Estado Novo" (New State) in 1933. His virtual dictatorship endured over four decades, becoming Europe's most prolific authoritarian government. Salazar had acted as Portugal's finance minister in the late 1920s and had played an important role in the stabilization of the country's finances.

The Espírito Santo family expanded its banking empire into other financial markets in the 1930s, starting with the acquisition of Companhia de Seguros Tranquilidade, founded in Oporto in 1871. Toward the end of the decade, the bank grew again, this time through a merger with Banco Comercial de Lisboa in 1937. Founded in 1885, the Banco Comercial de Lisboa helped strengthen BES's presence in the capital city, boosting its size by more than 30 percent. Renamed as Banco Espírito Santo e Comercial de Lisboa (BESCL), the bank began expanding its network, opening its first branch office in Lisbon, where previously it had only had its main office, in 1939. By the end of the 1940s, BESCL's branch network had covered the entire Lisbon metropolitan region, and the bank boasted nearly 35 branches in all.


Salazar's strategies fostered Espírito Santo's growth during and after World War II. Portugal's neutrality during the war made it a haven for the wealthy of Europe, and postwar protectionism precluded foreign competition. Salazar's tenuous hold on Portugal's African colonies facilitated the Espírito Santo family's acquisition of major sugar, coffee, and palm oil plantations in Mozambique and Angola. BESCL extended its banking presence into the colonial regions, establishing branches in Angola and Mozambique. Back at home, the 1960s brought a veritable "boom" to what had historically been Western Europe's poorest nation, as economic growth surged at an annual rate between 5 and 7 percent. The fast-growing economy enabled BESCL to extend its banking network, and by the end of the 1960s the bank operated some 50 branches throughout Portugal.

BESCL also grew through acquisition, notably through its purchase of Cassa Bancaria Blandy Brothers, based on the island of Madeira and controlled by the Blandy wine-making family. The bank also entered Luxembourg, buying up shares in Banque Interatlantique. Into the early 1970s, the bank also became a partner in the establishment of two new banks, Libra Bank, formed in London in 1972 by a consortium including Chase Manhattan Bank, National Westminster Bank, Credito Italiano, and the Mitsubishi Bank; and Bank Inter-Unido, created in Angola in 1973 in partnership with Citibank.


Mission: BES Group aims to be the leading Portuguese multispecialist financial group in terms of innovation, customer service, profitability and efficiency.

While maintaining strict risk management, BES is continuing organic market share growth fueled by anticipation of client needs and alliances with premier partners to leverage on our strong brand image.

By the early 1970s, the privately held, $2 billion-asset Banco Espírito Santo had become Portugal's largest bank, and its Tranquilidade subsidiary was the country's top insurance company. The family fortune was estimated to total $4 billion at its peak.

When Salazar suffered a debilitating heart attack in 1968, however, his successor, Marcelo Caetano, was unable to hold the Estado Novo together. By 1974, the pressure of colonial wars and deep economic recession precipitated a bloodless military coup. Although the new regime, the Movimento das Forcas Armadas (Armed Forces Movement, or MFA), instituted what has been characterized as "a moderate form of democracy," its communist leanings led to the nationalization of Portugal's biggest companies. Initially the government proposed a partial nationalization of a number of industries, with the government taking control of 51 percent stakes in the country's mining, oil and gas, electricity, steel, tobacco, and arms industries. The banking sector was initially left out of the original nationalization plan.


José Maria do Espírito Santo Silva establishes a foreign exchange agency, Caza de Cambio, in Lisbon.
Espírito Santo Silva forms a banking partnership, which later becomes Silva, Beirã, and Pinto & Ca.
Silva, Beirã, and Pinto & Ca becomes Banco Espírito Santo.
Banco Espírito Santo merges with Banco Comercial de Lisboa, and becomes Banco Espírito Santo e Comercial de Lisboa (BESCL).
A subsidiary is established in Luxembourg.
BESCL joins in the creation of Libra Bank Limited in London.
Banco Inter-Unido in Angola is formed in partnership with Citibank.
The Portuguese government nationalizes BESCL; the Espírito Santo family rebuilds financial holdings in Luxembourg, forming the company that becomes Espírito Santo Financial Group (ESFG).
BESCL opens a London branch.
BESCL opens branches in New York and Nassau.
ESFG returns to Portugal and begins rebuilding investments in the country.
The Portuguese government begins privatizing the banking and insurance industries, and ESFG reacquires control of the Tranquilidade insurance group.
The first stage of BESCL privatization is initiated; ESFG acquires 40 percent of BESCL.
BESCL privatization is completed, and ESFG acquires full control of BESCL; Banco Industrial del Mediterraneo in Spain and BES Vénetie in France are acquired.
BES Directo telephone banking service is launched.
BESCL enters the Asian region with a banking subsidiary in Macao.
A stake in Banco Boavista Inter-Atlantico in Brazil is acquired.
BESNET online banking service is launched.
BESCL changes its name to Banco Espírito Santo S.A.
Banco BEST is launched in partnership with Portugal Telecom.
Spain's Banco Inversion is acquired from Germany's HypoVereinsbank; two business units, Lusogest and Lusopensiones, are acquired from Banco Simeon Asset Management.
The company agrees to transfer 50 percent of the Tranquilidade insurance group to Credit Agricole.

Yet the botched military coup of early 1975 led to an investigation of its backers, which included a number of members of the Espírito Santo family. The investigation uncovered evidence that the family, through BESCL, had diverted funds meant for the country's demobilized soldiers to its own accounts. The resulting scandal led the bank's own workers to strike, in part to prevent the removal of documents and the transfer of bank money outside of the country, and demand that it be nationalized. Within a week, both Portugal's bank and insurance industries were taken over by the new Portuguese government. Chief Executive Officer Manuel Ricardo Espírito Santo was arrested at a meeting of the bank's board of directors and condemned to a 14-month prison sentence.

Battered but unbowed, the Espírito Santo family fled to Spain, then settled in London. The family took its meager settlement from the government and founded E.S. International Holding S.A. in Luxembourg with $20,000. They purchased a major stake in Florida's Biscayne Bank (later renamed Espírito Santo Bank of Florida) in 1978 and won a Brazilian banking license late in the decade. They began to reassert the well-recognized family name in 1983 with the creation of Bank Espírito Santo International Ltd. in the Cayman Islands. They also purchased equity in banks in London and Paris, and established a fund management company in Lausanne, Switzerland. The group was renamed Espírito Santo Financial Group (ESFG) in 1984. The company then listed its shares on the New York and London Stock Exchanges. By 1990, they had accumulated a $246 million enterprise.

During this period, BESCL continued its own growth, increasing its number of branches to 110 by the end of the 1970s, and then to more than 170. The group's assets made a substantial leap, growing from PTE 156 billion to nearly PTE 1.2 trillion. BESCL also launched new overseas operations, adding a London office in 1980. The bank then opened offices in New York and Nassau in 1985, before adding branches in Madrid and Madeira by the end of the decade.

In the meantime, the 1985 election of free-market Social Democrat Anibal Cavaco Silva heralded an era of reprivatization. When the new regime began to reprivatize financial institutions and insurance companies in 1986, the Espírito Santo family wasted no time in reentering their home country to begin the process of rebuilding their financial empire. The family's holdings quickly spread into the real estate, agroindustrial, communications, and services markets. ESFG also set up operations in assets management. The family's real target, however, was to regain control of their former financial holdings. In 1986, ESFG formed a commercial bank, Banco Internacional de Credito, as a joint venture with France's Credit Agricole. Espírito Santo used the proceeds of a Eurobond floatation to repurchase Tranquilidade, starting in 1989 and completed in 1990. The family then turned its sights on its former bank. ESFG's chance came in 1991, when the Portuguese government put 40 percent of BESCL up for sale. Backed by partner Credit Agricole, ESFG won the bid. Within a year, the Portuguese government had approved the sale of the remaining 60 percent of BESCL, and in February 1992, the Espírito Santo family took back full control of the bank.

While nationalization had weakened some of BESCL's competitors, Espírito Santo was fairly well managed throughout the period of state ownership. In 1993, Espírito Santo official Manuel Villas-Boas told Euromoney, "To a large degree the bank kept to the philosophies of credit and the systems implemented before the period of nationalization. The bank was fortunate in the choice of management it had under nationalization, and the bank had a strong and well provided balance sheet when we took it back."


That did not mean that there was no room for improvement, however. For example, BESCL's employee roster had grown by 70 percent during the period of nationalization. Led by Chairman Ricardo Espírito Santo Silva Salgado, the family focused on restructuring the group and increasing efficiency. They called upon well-known management consultants McKinsey and Company to assist with the reorganization. The new management team increased productivity dramatically by reducing staffing levels from 6,800 in 1990 to 5,700 by 1994, while simultaneously increasing the number of branches from 177 to 332. The ratio of administrative costs to financial assets decreased by almost 18 percent and the number of employees per branch declined from 27 to 17 in the process. Assets per employee doubled from 1991 to PTE 400 million in 1994. In 1993, BESCL boosted its technological efficiency with a $12.8 million computer network upgrade from Unisys Corp.

The bank also shifted its strategic focus from corporate clients to private customers, who had proven loyal patrons during the exile. Espírito Santo's commercial bank, Banco Internacional de Credito, sought to increase its share of Portugal's mortgage business to 10 percent by the mid-1980s. In 1992, the financial group added a Spanish institution, Banco Industrial del Mediterraneo, to its growing roster of businesses, at an estimated price tag of ESP 5.5 billion ($55 million). The company's increasingly diverse interests, which included leasing, investment banking, and credit cards by the mid-1990s, allowed for cross-selling of products and services.

An unidentified Lisbon banker told Euromoney, "Espírito Santo represents old money in Portugal. Their bank is the last of the old commercial banks that has retained its power." That name recognition factor helped impart "an image of solidity and conservatism." BESCL continued to nurture that reputation in the early 1990s, employing a conservative lending policy and maintaining a highly diversified loan portfolio. That caution earned Espírito Santo the highest international credit rating given to a Portuguese bank. These strong appraisals, in turn, enabled BESCL to successfully float $76.9 million of its shares as American Depositary Receipts (ADRs) on the New York Stock Exchange in 1993.

In 1993, Euromoney noted, "Espírito Santo's biggest challenge is to adapt the style and organization of a bank which existed when Portugal was a small rural economy into one fit for a growing industrial and international environment." ESFG appeared to take this advice to heart, and in the 1990s began expanding and modernizing its range of financial services, as well as its geographic reach.

The company also added a new subsidiary in France, BES Vénetie. In 1993, ESFG added investment banking products to its lineup with the launch of Banco Espírito Santo de Investimento. The company also added a telephone banking service, BES Directo, in 1994. The group's banking services were later expanded again with the launch of an online banking service, BESNET, in 1998. The company changed the name of its bank in 1999, to Banco Espírito Santo, S.A.

In addition to building up its Portuguese holdings, ESFG expanded its operations elsewhere around the world. The company entered the Asian market for the first time in 1995, with the launch of a new subsidiary in Macao. The company later extended its presence in the region with a representative office in Shanghai.

Latin America remained an important market for ESFG as well. The company raised its profile in the region in 1997, when it acquired a major stake in Banco Boavista Inter-Atlantico, based in Brazil and serving especially the regions of São Paulo and Rio de Janeiro with more than 70 branches. In that year also, the company acquired a stake in Société Bancaire de Paris, then turned to Poland, where it bought a stake in Kredyt Bank PBI. The company continued to increase its Kredyt Bank PBI holding, to 10 percent in 1999, and then to nearly 20 percent in 2000. By then, ESFG had returned to Spain, where it bought ES Bank, as well as the investment banking groups Benito y Mionjardin and GESCapital.

ESFG attempted to merge BES with Banco Portugues de Investimento, which would have boosted BES into the lead in Portugal's banking sector. When that merger collapsed, however, the company switched its strategy, targeting the Internet for further growth. This led ESFG to form a partnership with Portugal Telecom in 2000 to launch e-finance projects. The first of these debuted in 2001, the online bank Banco BEST. The company also added a new bank in the Azores, Banco Espírito Santo dos Açores, in 2002. In that year, the company sold off its stake in Kredyt Bank.

ESFG returned to Spain in 2004, buying up Banco Inversion from Germany's HypoVereinsbank for EUR 11 million ($13.5 million). Also that year, the company acquired two business units, Lusogest and Lusopensiones, from Banco Simeon Asset Management. As it entered the second half of the decade, ESFG continued seeking additional growth opportunities, announcing in 2005 its interest in re-entering the Eastern European market through subsidiary Banco Espírito Santo de Investimento. At the beginning of 2006, ESFG restructured its holdings, agreeing to transfer 50 percent of its control of the Tranquilidade insurance group to Credit Agricole. Still controlled by the Espírito Santo family, ESFG had established itself as a fast-growing international financial group.

                                   April Dougal Gasbarre

                                   Updated, M. L. Cohen


Banco Espírito Santo (Angola); Banco Espírito Santo (Cayman Islands); Banco Espírito Santo (U.S.A.); Banco Espírito Santo de Investimento; Banco Espírito Santo do Oriente (Panama); Banco Espírito Santo; Banco Internacional de Cridito; Bank Espírito Santo (International) Ltd. (Spain); Banque Espírito Santo et de la Vinitie (Macao); BES Investimento do Brasil; Compagnie Bancaire Espírito Santo (Switzerland); Companhia de Seguros Tranquilidade; Companhia de Seguros Tranquilidade Vida; ES Bank (Panama) S.A.; ESAFEspírito Santo Activos Financeiros; Espírito Santo Activos Financieros (Spain); Espírito Santo Bank (France); Espírito Santo Companhia de Seguros; Espírito Santo Investment, SAU, SV (Spain); Europ Assistance.


UBS AG; HSBC Holdings PLC; Groupe BNP Paribas; The Royal Bank of Scotland Group PLC; Deutsche Bank AG; Allianz AG; Credit Agricole S.A.; Barclays PLC; Banco Santander Central Hispano S.A.; Societe Generale de Banque; Dexia S.A.; Banco Bilbao Vizcaya Argentaria S.A.; Fortis Bank.


"Espírito Santo Buys Spanish Wealth Player," Private Banker International, September 2004, p. 2.

Gilbert, Nick, "Espírito Santo: Kindred Spirits," Financial World, March 1, 1994, p. 18.

"Home Free and Looking to the Future," Euromoney, June 1993, p. 149.

Kraus, James R., "Big Foreign Banks Come Ashore to Raise Equity in U.S. Markets," American Banker, November 19, 1993, p. 24.

, "More Banks Hopping on ADR Bandwagon," American Banker, September 7, 1993, p. 9.

"Portugal: Espírito Santo's 16-Year Odyssey," International Management, August 1990, p. 19.

"Portuguese Financial Group BESI Considers Investing in Czech Republic, Czech Business News, January 21, 2005.

Satterfield, David, "Miami Bank Ruffles Legal Feathers Over Use of Family Name," American Banker, March 10, 1987, p. 16.

Scherreik, Susan, "Looking Abroad for Stock Gains of 28 Percent or More," Money, January 1995, p. 68.

Wise, Peter, "BES Set for Global Online Expansion," Financial Times, July 26, 2000, p. 31.