Low bids for Novo Banco means taxpayer losses

novobancoThe highest Chinese bid for the acquisition of Novo Banco is 'just over €4 billion' but this still is way short of the €4.9 billion desperately needed by the Treasury to save it the embarrassment of losing taxpayers’ money on the deal, which it and the Prime Minister have stated is not an option.

Spain’s Santander went in low at €2.5 billion and Portugal’s Banco Português de Investimento offered just over €2 billion which was rejected earlier this week.

These bids are not officially confirmed but widely available due to leaks of the highly sensitive information.

The highest bid from one of the two Chinese companies exceeds €4 billion but is not binding and is subject to various conditions. Now that the leak is out and the Chinese corporation knows the other bids, it can reduce its offer and the others can increase theirs.

Information on the various bids is 'safely' with the Bank of Portugal which has 'a strict code of silence' and the bank is being advised by BPN Paribas but this evening the market is buzzing with possible outcomes.

These proposals cannot easily be compared as some include capital increases as well as the headline offer.

The Bank of Portugal also set a condition that Novo Banco's property assets will be sold separately from the banking business.

Santander has denied making a low-end bid but the news is widely available and has not been contradicted. In fact, the Santander bid is between €2.5 and €3 billion, a value between 50% and 60% of the €4.9 billion injected last August by the Resolution Fund and a taxpayer top up.

Santander is the only actual bank still in the running after BPI’s €2 billion + offer was rejected.

Of the 15 initial interested parties, seven submitted non-binding proposals of which two have been rejected.

There are five left; Santander, the Chinese companies Fosun and Anbang, and the American funds Apollo and Cerberus.

The non-banking bidders are private equity companies which will aim to sell Novo Banco at the earliest point where they can turn a decent profit.

In ten days time applicants can access more detailed information about the loss-making Novo Banco and then decide whether to submit a binding proposal.

Sadly the final decision lies with the Bank of Portugal whose chaotic and bumbling actions certainly did nothing protect the public and the market from the machinations of Ricardo Salgado at Banco Espirito Santo before or during its collapse in August last year.

If the final sale price is less than the €4.9 billion required to clear taxpayer exposure, the Resolution Fund will sit with the loss, a fund that is under the control of Caxia Geral, owned by the state, a polite way of saying ‘the taxpayer.’

If Novo Banco is sold, and this is by no means certain at these sorts of prices, the new owner will have to contend with the fury of the BES investors group which already has delivered warnings to those businesses on the final roster.

The group’s members want €550 million returned that was invested in Grupo Espírito Santo companies and marketed as safe by staff in BES branches.

There were further disturbances yesterday at Novo Banco in Viseu and Lisbon where the protestors continue to make clear their anger at the way they have been ignored totally by government, the Bank of Portugal, the market regulator and the management of Novo Banco which smoothly has managed to fob them off as it concentrates on its own sale.

Pin It