DBRS Lowers Espírito Santo Financial Group to BBB (low) After Downgrade of Portugal to BBB (low)

DBRS, Inc. (DBRS) has today downgraded the ratings of Espírito Santo Financial Group, S.A. (ESFG or the Group) following the downgrade of the Republic of Portugal. DBRS has downgraded ESFG’s Senior Long-Term Debt rating to BBB (low) from BBB and the Short-Term Instruments rating to R-2 (mid) from R-2 (high).The trend on all ratings remains Negative. These rating actions follow DBRS’s downgrade of the Republic of Portugal to BBB (low) from BBB, with the trend remaining Negative.

The rating action reflects the Group’s controlling interest in Banco Espírito Santo (BES), which is based in Lisbon, Portugal. BES is the principal operating subsidiary of ESFG. BES’s intrinsic strength is the principal driver for continued dividend payments to the parent company, which translates into the predominant share of ESFG’s net income.

In light of this sovereign rating action, upcoming bank earnings, and the condition of the financial sector, DBRS will continue to evaluate the intrinsic strength of the Group. DBRS maintains its SA-3 support assessment for ESFG, reflecting no expectation of any form of timely external support.

Notes:
All figures in Euros (EUR) unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations. Other methodologies used include the DBRS Criteria – Intrinsic and Support Assessments. Both can be found on the DBRS website under Methodologies.

The sources of information used for this rating include DBRS's rating action on the Republic of Portugal, company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Roger Lister
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 20 April 2011
Most Recent Rating Update: 20 October 2011

This credit rating has been issued outside the European Union (EU) and may be used for regulatory purposes by financial institutions in the EU.

For additional information on this rating, please refer to the linking document under Related Research.