Lone Star will keep Novo Banco until 2021
The American vulture fund Lone Star, which owns Novo Banco, says it has no plans to sell it before 2021.
The fund which owns 75% of Novo Banco says it will continue restructuring the bank which will last another 12-18 months.
The statement was given to Dinheiro Vivo at a time when speculation has been swirling around the bank’s future, namely that it will be sold to either Millennium bcp or Santander.
When Lone Star bought its stake in the bank in October 2017 it did so under an agreement that it would not sell its share for at least three years. The remaining 25% is held by the bank sector’s Resolution Fund.
“Lone Star does not have plans to sell its stake in Novo Banco in the short term” stated Lone Star in reply to question from Dinheiro Vivo.
“We are confident that the bank’s restructuring phase can be completed in the next 12 to 18 months, taking advantage of attractive market conditions to clear the remaining legacy (Non-Performing Loans) from Banco Espírito Santo.”
Lone Star stresses that Novo Banco is “viable and growing” and that its “positive results” have been able to “absorb part of the losses inherited from BES.”
“Up until the present the bank has complied with the plans agreed upon with the European Commission in Portugal at the time of its (the bank’s) acquisition by Lone Star and is meeting the capital needs expected regarding the legacy from BES” it states.
Nevertheless, the legacy from BES has had a disastrous impact on the actual financial results of the bank over the past five years.
In 2018 the bank ended the year with a €1.4Bn loss while the year before it stood at €2.2Bn in the red.
Novo Banco was created in August 2014 to hold the good assets from BES which was wound up after it collapsed that year.
The bank was sold to Lone Star after an agreement was reached between the Portuguese government and Brussels which included a restructuring plan and a recapitalisation of up to €3.89Bn to 2026.
This €3.8Bn is the total amount that by 2026 the State may have injected into the bank and came from loans from the Resolution Fund which is linked to the Single Resolution Mechanism.
The Single Resolution Mechanism (SRM) is the European system for resolving non-viable banks. Within the SRM, the responsibility for the resolution of credit institutions is shared between the Single Resolution Board and the national resolution authorities in euro area Member States – including the Bank of Portugal – and in other European Union countries which choose to join the Banking Union.The SRM also comprises the Single Resolution Fund. Financed by the banking sector, this fund is intended to support the resolution of banks which are failing or likely to fail, after other options, such as the bail-in tool, have been exhausted. The SRM became operational on 1 January 2016.Novo Banco saw its losses increase 46% to €572.2 million in the first 9 months of 2019 but had a profit from its regular accounts (i.e., it banking activities minus the toxic loans).“We are impressed with what the management team and bank staff led by António Ramalho and Mark Bourke have achieved,” states Lone Star.