Moody’s improves Novobanco debt rating

The US ratings agency Moody’s increased the rate of Novobanco’s non-secured senior debt from Ba1 to Baa3 on Thursday with a ‘positive outlook’.

It means that bank’s investment prospects are no longer seen as speculative or ‘junk’ status.

It is good news for the bank as speculation swirls that it is being prepared for either a sell off or an Initial Public Offering.

Novobanco issued a profit estimate of €700 million for 2024 at the start of August and a total bank product of €1.4Bn.

The €700 million was around €50 million above the previous forecast that suggested a profit of €650 million.

Moody’s decision to raise the rating was based on the probability that Novobanco will continue to issue bonds to meet the Minimum Requirement for own funds and eligible liabilities (MERL).

By January 1, 2026, the financial institution has to comply with an MREL of 27%, but at the end of June 2024 this indicator was already above the requirement, at 28.3%.

At the same time, Moody’s expects that the dividend ban currently in force will be “lifted by December 2025 with the end of the contingent capital agreement established in 2017”, when Novobanco was sold to US equity management company Lone Star.

In a statement to the market the bank also informed that ratings agency Moody’s has also “improved the rating of novobanco’s bonds to Prime 3 from Not Prime”.