The costs of the aborted negotiation to sell Novo Banco can be seen in the rapidly shrinking share price of BCP and BPI, two of the banks that had to put money into the Resolution Fund to solve the crisis at BES, creating Novo Banco.
The shares of all the participating banks have recovered slightly today but overall are down with sharp declines in September during the course of negotiations for the sale of the Novo Banco, first to Anbang and then to Fosun, both of which have led to nothing.
BCP and BPI between then have had more than €900 million shaved off their value with BPC falling 22% from the beginning of the month compared to BPI dropping 8%.
The market capitalisation of BCP, the bank led by Nuno Amado, has shrunk by €808.8 million and that of BPI's by €107.8 million over fears that now will be realised that after the next ‘stress test’ by the European Central Bank, Novo Banco will need a further mound of cash to enable it to keep trading.
This additional funding will most likely come from Portugal’s high street banks through the Resolution Fund. The other option os that the government depleted its own, carefully harvested reserves or issueds more bonds to fund the doomed venture.
The postponement of the sale of Novo Banco until after the results of the ECB stress tests feed fears that the sale will be for an amount lower than the money injected into the Resolution Fund, and if the bank is sold for less than the amount put in, the losses will hit Portugal’s participating banks with further share price falls inevitable as their cash position worsens.
