The Bank of Portugal can delay no longer and is to announce the name of the new owner of Novo Banco before the Christmas holiday break.
Only when the Bank of Portugal governor makes the call will the government be able to assess the massive losses incurred in this botched ‘rescue.’
The short list of potential buyers is down to two; China’s Minsheng Financial Group and the American fund, Lone Star.
At least there are interested parties: the 2015 sale ended in collapse with the Bank of Portugal pulling the deal due to the embarrassingly low final offers tabled.
The current bids are thought to be even lower than those that triggered the 2015 sale suspension and Carlos Costa will struggle to explain away how he has managed to lose the State and the Resolution Fund an estimated €4 billion as a result of his 2014 ‘rescue package’ when Banco Espírito Santo went to the wall and Novo Banco was created to soak up all the ‘good bits.’
From the initial six interested parties, five offered final proposals. Now there are two left, with Lone Star aiming to buy Novo Banco outright, but with some heavy liability clauses, and Minsheng preferring to buy Novo Banco and then to float 50% of the share capital in a couple of years.
Novo Banco was set up using €3.9 billion from the Resolution Fund and around €1 billion from the government i.e. taxpayers’ money.
With bids expected to be well below €1 billion for Novo Banco, either choice of new owner will crystalise losses in the region of €3.9 billion, probably more, with the Resolution Fund having to stand in line until after the taxpayer is refunded.
There is no compelling reason for the Bank of Portugal to pull off the deal before Christmas, it has until August 2017 to come to a decision on whether to sell Novo Banco or wind it up, the latter being an even more disastrous conclusion for Carlos Costa that selling the bank at an eye-watering loss.
