Novo Banco sells NATA II debt portfolio

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Novo Banco has announced that it has reached an agreement with a partner of Davidson Kempner European Partners for the sale of a portfolio of Non-Performing Loans (NPLs) worth €1.7Bn: Project Nata II.

Despite the deal having a negative impact of €106 million on the bank’s 2019 accounts, the US ratings agency Moody’s states that it is positive for the bank’s overall credit rating since it represents “an improvement in the bank’s very weak performance metrics over risky assets.”
The bank had non-existent profits between 2014 (-€498 million) and 2018 (-€1.413Bn)
with worst losses recorded for 2017 (€2.2Bn).
The latest evaluation is contained within an analysis report released on Wednesday by the ratings agency which mentions that the offloading of the NATA II project is forecast to be completed before the end of this year.
Novo Banco’s total stock of NPLs stood at €6.3Bn by the end of June, representing almost 22% of its gross loans.
Moody’s say that this NPL ratio “compares very badly” compared to the average 9.6% seen in Portugal’s banking system, but adds that it had improved on the ratio of 23.5% that was recorded for the end of 2018.
Taking in consideration too the stock of real estate assets sold off (€2.3million by the end of June 2019), the ratio of Non-Productive Assets – NPAs stood at 27.6%, the highest for a Portuguese bank with a rating notation (the average NPA ratio was 13.3% at the end of 2018)
With the completion of the clearance of the NATA II portfolio from its books, Moody’s estimates a reduction in Novo Banco’s NPLs of around 17% and its ratio of NPAs to 23%.