The Bank of Portugal and the Chinese company Fosun have failed to agree on the sale of Novo Banco, mainly because of the price.
There is still a third candidate in the race, the US based Apollo fund but The Bank of Portugal is not able to start negotiations with Apollo as its offer price was below the other two that have been considered and now rejected.
Carlos Costa, (pictured) the Bank of Portugal governor said that the sale will be postponed until after the elections on October 4th but this leaves him insufficient time formally to re-launch the sale process, leaving him the unenviable option of cobbling together a deal with Apollo.
Fosun ended up offering just €1.5 billion for the business, not even half of the €3.9 billion that the state put into the ‘resolution fund’ used in affect to bail out BES which collapsed last August and further still from the €4.9 billion total it cost to set up the whole rescue deal.
Faced with this impasse and two rejected offers, the sale will be delayed until the results of the European Central Bank's stress tests which will dictate how much more money needs to be pumped into Novo Banco to shore up its capital reserves.
Costa can still open talks with Apollo, but as they put in the lowest bid, Carlos Costa can not start final negotiations so is rather stuck.
This return to square one will have a dire impact on the 2015 public accounts with the Technical Unit for Budget Support warning that the government will have to issue more debt or borrow from central government deposits if Costa fails to sell Novo Banco by the end of the year.
The Minister of Finance's position seems to present a weak grasp of reality, "We have no reason to be concerned. It is perfectly accommodated within our strategy of having a sufficient financial reserve,” said Maria Luís Albuquerque, who declined to comment on the failure of the sale.
The Prime Minister, Pedro Passos Coelho, denied on Friday that the government influenced the decision to reject Fosun’s offer, and expressed confidence in the Bank of Portugal. "We have no hurry nor did we influence this decision, and I reaffirm that I have confidence in the Governor of the Bank of Portugal to conduct the operation."
The prime minister was speaking during a debate with the Left Bloc’s Catarina Martins on RTP. She had challenged Passos Coelho to "apologise to the country" for saying that this failed sale process will not have a cost for taxpayers.
Passos Coelho said that "taxpayers did not and will not lose money over Novo Banco" but now that Costa has failed again, the Prime Minister may have to review Costa's past and current performance and put someone in place that can do the job required.
