With €3.4 billion in taxpayer funds, Portugal’s fourth largest bank Novo Banco’s potential sale raises critical questions about state recovery, expected in 20 years.
Novo Banco is poised for a potential sale on the Stock Exchange by the summer, with expectations set for June. The financial saga surrounding this institution is nothing short of a modern-day Greek tragedy, albeit with fewer gods and more spreadsheets. To date, a staggering 3.4 billion euros has been funneled into Novo Banco’s coffers, primarily sourced from the taxpayers’ wallets. However, the State can expect to see a mere fraction of this investment returned—if at all—over the next two decades.
The valuation of Novo Banco, the phoenix that rose from the ashes of Banco Espírito Santo (BES), is estimated to be between 4.8 billion and 6.2 billion euros, according to an assessment conducted by the Spanish consultancy firm JB Capital. The American investment firm Lone Star, through its subsidiary Nani Holdings, currently holds a commanding 75% stake in the bank, while the remaining 25% is retained by the State via the Resolution Fund and the Directorate-General of the Treasury.
Rescued from the brink of collapse in 2014, Portuguese financial bank Novo Banco owes its survival to a series of capital injections from the State, which were necessitated by the resolution measures that created the infamous ‘bad BES.’ In this restructuring, former shareholders were left with nothing, while the ‘good bank’ emerged, albeit only with the lifeline of public funds.
As the clock ticks down to a potential public offering—the largest in Europe this year and a significant event in Portugal’s financial landscape—speculation abounds regarding the sale of 25% to 30% of the bank by its American owners. Discussions have surfaced about possible acquisitions by other national banks, but the chairman of the resolution fund has emphasized that competition will be the linchpin in this unfolding drama.
Novo Banco’s employees are advocating for management to reserve between 5% and 10% of the shares for them, coupled with a request for a discount on their acquisition. As the narrative unfolds, one cannot help but marvel at the intricate dance of finance, politics, and the ever-elusive quest for stability in the banking sector. Will Novo Banco emerge triumphant, or will it be yet another cautionary tale in the annals of economic history? Only time will tell.
