Portugal Cautions Against Increased Spanish Bank Involvement

Portugal has expressed concerns over the rising presence of Spanish banks in its market, indicating a growing reluctance among European governments to allow potential banking transactions that could affect national interests.

As noted by Finance Minister Joaquim Miranda Sarmento in a recent interview with RTP3, Spanish lenders currently account for about one-third of the Portuguese banking sector. He stated, “I don’t believe this figure should rise further due to issues of concentration and dependency.”

Meanwhile, Novo Banco SA, a Portuguese bank predominantly owned by the US private equity firm Lone Star, is gearing up for a possible initial public offering (IPO). There have been reports, including one from Bloomberg on May 9, suggesting that Spain’s Kaisabank SA is interested in acquiring Novo Banco, alongside potential interest from French banking group BPCE.

This stance from Portugal reflects a broader move by various European nations to curb banking activities deemed detrimental to their domestic interests. Notably, Spain is opposing BBVA SA’s proposed acquisition of Banco Sabadell SA, while Italy is working to block Unicredit SPA’s purchase of Banco BPM SPA, and Germany is against Unicredit’s possible takeover of Commerzbank AG.

In terms of performance, Novo Banco has shown improvement, posting its first profit in 2021 as net interest income increased with the rise in central bank interest rates. The bank had previously struggled with a high loan ratio, making significant asset reductions and selling off bad debts after being formed from the remnants of Banco Espirito Santo SA a decade ago.

“Novo Banco’s decision has turned into a lonely star,” Sarmento remarked, adding that if Lone Star chooses to sell, they would simply place it on the market for potential buyers.

Already, Spanish banks Banco Santander SA and Kaisabank are among the five largest banks in Portugal. Yet, Santander ruled out any interest in acquiring Novo Banco as of February 7.

“It is a concern for a nation to be overly reliant on banks from a single country, especially with excessive dependence and concentration, like we see with Spain,” Sarmento commented.

Lone Star holds a 75% stake in Novo Banco, while Portugal retains a 25% share through various national resolution entities managed by the Bank of Portugal. In a recent interview, Novo Banco’s CEO Mark Bourke mentioned they are well along in drafting a prospectus for the anticipated IPO.

In a statement from January, Sarmento indicated that Lone Star plans to sell around 25% to 30% of Novo Banco’s stake during the IPO. He also noted that if the state-owned Caixa Geral de Depósitos SA wishes to explore interest in purchasing Novo Banco, the government would not interfere.

“What I’ve consistently stated is that if Caixa can evaluate the market and propose a Novo Banco offer, either independently or with a partner, they should present this to the shareholders for consideration,” Sarmento added.

On February 27, Caixa CEO Paulo Macedo confirmed that his bank is looking into the possibility of acquiring Novo Banco. In response to questions about Novo Banco, the CEO of Banco Comercial Português SA, Miguel Maya, indicated that while they could analyze the deal, their focus was primarily on organic growth.

A March research report from JB Capital estimated Novo Banco’s value at between 5.5 billion euros ($6.2 billion) and 7 billion euros. As of May 6, the bank reported holding approximately 17 billion euros in assets, including around 10 billion euros in mortgages and 2 billion euros in personal loans, and serving about 1.7 million clients.

Banco Espirito Santo, which was once the leading bank in Portugal by market value, was rescued with around 5 billion euros in 2014 after regulators called for increased capital due to potential losses linked to the family-run Espirito Santo Group. Subsequently, the Portuguese central bank moved most depositors’ assets to Novo Banco, and in 2017, Lone Star agreed to invest one billion euros into Novo Banco when it acquired shares in the institution.