Portugal’s Prime Minister has told the European Commission that there will be no more State aid for loss-making Novo Banco and if the bank is not sold after the current bidding process, it will be wound up.
However, Portugal’s Finance Minister Mário Centeno has told Brussels that he is ready to put more money in Novo Banco through a renegotiated loan from the Resolution Fund, if the offers for the bank come in low.
Centeno clarified to Brussels that the sale process for Novo Banco Bank ends in August and that the State itself will not inject new capital but will call on the Resolution Fund to stump up more funds.
The Bank of Portugal received four bids for Novo Banco by the June 30th deadline but nobody expects the offers to be anywhere near the €4.9 billion that the Bank of Portugal’s governor Carlos Costa threw at the problem in his August 2014 ‘resolution.’
The bids under evaluation are said to be from BPI, Apollo/Centerbridge, Lone Star and BCP.
If the bids are not considered satisfactory, Carlos Costa’s Plan B is to float the bank on the stock exchange, much against the will of the Stock Exchange Regulator Carlos Tavares.
The future for the bank depends on the size of the best bid. The amounts offered by the Chinese in the last sale attempt were around €1.3 billion. There is little expectation that bids in this round will be €3.6 billion higher hence the Bank of Portugal will be back to square one with a floatation or liquidation two of the remaining options.
The Bank of Portugal and the previous coalition government together decided to create Novo Banco from the wreckage of BES in order "to keep the Portuguese financial system stable." Carlos Costa later eased Novo Banco's balance sheet by removing over €2 billion in senior debt, sending it to 'bad bank, BES to the fury of lenders such as Goldman Sachs whose investments had turned to dust overnight.
The collapse of Banif 15 months after BES went bust showed the financial system's stability to be mythical and the real damage to the financial system from the creation of Novo Banco is shortly to be felt.
