Ramalho admits to inconsistencies after Deloitte report

 In Banks, News, Opinion, Property

The CEO of Novo Banco, António Ramalho has admitted to some inconsistencies and disparities identified by a €3 million audit into the bank+s management and that of its predecessor, failed bank Banco Espírito Santo.

In an interview with TSF radio, António Ramalho admitted on Saturday that the conclusions drawn in an extensive report into the operations at the bank did reflect some “small inconsistencies,” but that they were the kind of “subjacent and operational inconsistencies” one would expect to see in any period or term of management.
At a time when the Government has already stated that it does not foresee a further cash injection that would be reflected in the State Budget for 2021, the Novo Banco CEO says that he would not “rule out such a scenario or any other” and argues that it “makes more sense to finance Novo Banco “so that its accounts can return to health”.
As to the final and effective beneficiaries to the sales of property portfolios which were allegedly sold at a discount and below market values, Ramalho said, “Lone Star [the company that injected €1Bn into the bank in 2017 when it bought the bank which was being restructured and had a raft of problems to resolve) has not bought absolutely any Novo Banco assets, because that is prohibited in the contract.”
António Ramalho added that the Resolution Fund knows the final beneficiaries of the (property sale) operations which will be sent to the minister of Finances, but cannot be made public because of secrecy obligations.
Regarding the sale of the property portfolios, the CEO of Novo Banco rejects the idea that there was “a big discount” and insist they were sold at “market prices”.
“Everybody says that they were sold at a massive discount. That’s not true. They were sold at the market rate. We made these sales because we had to make these sales. The banking law does not permit us to hold properties on our books for more than two years if they are not being commercially explored. Therefore, we had to sell them,” he explained.
Deloitte’s audit of BES/Novo Banco’s management covers the period between 2000 and 2018 and was delivered at the start of this month.
A redacted version of the report, with confidential sections removed, is available on the Budget and Finance Committee part of the website.
According to the ministry of finance, the report shows net losses of €4Bn at Novo Banco (between 4 August 2014, one day after BES was wound up, and 31 December 2018) and “describes a number of serious shortcomings and deficiencies” in BES’ lending and investment in financial assets and real estate until 2014.
In a press conference, the CEO of Novo Banco said that 95% of the losses referred to in the Deloitte audit were due to assets prior to 2014, i.e., that belonged to BES and passed over to Novo Banco in the resolution. He also stated that the audit “confirms the transparent and competitive way” in which Novo Banco has been recovering its balance sheet, mainly through the sale of asset portfolios.