Novobanco sale to national “competitor” wouldn’t be viable says Montepio boss

If Novobanco were to be sold to a competitor in Portugal (read Caixa Geral de Depósitos or BCP), the competition authority would likely impose “remedies”.

This is according to the President of Banco Montepio bank, Pedro Leitão, who in an interview with Antena 1 and business daily Negócios said he doubted it would be a “viable solution”.

The banker said that 75% of Portugal’s banking system was already in the hands of the five major banks (Novobanco, CGD, Santander, BCP and BPI), a figure that rises to 90% if Montepio, a mutual association, is included in the list.

Although he understands why such a merger would keep Novobanco in Portuguese hands, he also thinks it would be a good thing to disperse Novobanco’s capital on the stock market because it would mean that Portugal would have two listed banks and not just one. (BCP)

“Novobanco has its space in the market..(but) a sale of an operational bank in Portugal to another would significantly alter the competitive dynamic.

“When we often hear an argument that concentration is beneficial, that we shouldn’t have just a single market (i.e., Portugal’s banks in Portuguese hands), and that we should have mergers with overseas banks, I don’t see there’s any obstacle to this. And yet you have to ask why this hasn’t happened.

“There is recent information that shows this. The rapid concentration in Portugal’s banking market over the past 15 years was one of the fastest in Europe. Greece has 98% of its banking sector concentrated in the top 5 banks, but Luxembourg has 30%, Germany 32%, Austria 39%, France 49%, and Italy 52%.

“In Europe’s largest economies is their room for concentration, I think so. As for Portugal, there’s always room for this, But I don’t think it’s the main challenge and necessity for the Portuguese banking sector”, he said.

As for Novobanco, he said it was undeniably important for the Portuguese economy, that it was a bank that had been restructured and was competitive.

But “the sale of Novobanco to another bank in Portugal would significantly change the competitive dynamic, and I really don’t know whether from the Competition Authority’s view what remedies would be applied to an operation of this nature”, said Pedro Leite.

Novobanco currently has a 15% market share in Portugal and if it merged with State bank CGD it would have a 35% share of that market.