Portugal Travel

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Portugal's small investment bank BPP is likely to get a 600 million euro liquidity injection from a pool of banks and have central bank-appointed administrators, after its request for a state-backed loan was turned down, a newspaper report said on Thursday.

Diario Economico quoted unnamed sources at the country's leading banks as saying some guarantees were still being discussed but the central bank-led plan "to rescue" the unlisted Banco Privado Portugues could be announced on Thursday.

BPP said it was unable to comment on the report.

A week ago, BPP became the first Portuguese bank to publicly request state guarantees for a 750 million euro loan as part of the government's Oct. 12 aid package to the banking sector.

BPP chief Joao Rendeiro said then the request did not mean that BPP was in difficulties, but that additional liquidity was needed at a time of the global credit crunch.

Bank of Portugal Governor Vitor Constancio has since said that BPP's weighting in the financing of the country's economy entitled it to no more than 45 million euros in state-guaranteed loans. He said, however, the central bank was interested in solving "BPP's problem" and a solution should be found soon.

Publico daily said on Thursday the condition for the rescue may be the exit of Joao Rendeiro and his management team. Concerns over BPP's woes have pressured banks' stocks this week.

On Oct. 12, the government announced a credit guarantee of 20 billion euros to help banks ride out the global financial crisis. Portugal's top three banks, state-run CGD, and private Millennium bcp (BCP.LS: Quote, Profile, Research, Stock Buzz) and Banco Espirito Santo (BES.LS: Quote, Profile, Research, Stock Buzz) have said they applied for the state credit guarantees to issue debt.

According to its web site, BPP had around 2 billion euros in assets it managed in 2007 and about 1.93 billion euros in liabilities. It has 150 million euros in own capital.

Although their shares have been hammered by the market turmoil this year, Portugal's banks have weathered the financial crisis relatively well as they held no toxic U.S. subprime assets and have relatively conservative lending practices.