Novo Banco could be given away rather than the taxpayer underwriting future losses if the bank is sold.
Bidders still interested in the purchase of the high street bank are only interested if the State indemnifies them againt future losses resulting from hidden bad debts, non-perrforming loans and other horrors that lurk in the bank’s carefully worded accounts.
The starting price for Novo Banco was €4.9 billion, the minimum needed for Bank of Portugal governor Carlos ‘Mr Magoo’ Costa to recover any sort of credibility as this was the amount shovelled into the 'good bank' to get it started.
Costa said Novo Banco could be sold ‘at a profit for the taxpayer’ when he hatched his hopeless in August 2014 when Banco Espirito Santo went bust.
The first round of bidders were dismissed as Costa realised, with increasing concern, that no bidder was going to offer anywhere near his asking price, so he simply pulled the sale - the equivalent to an ostrich burying its head in the sand.
In the interim, the price on offer for the busienss has collapsed further.
The latest bid from Lone Star, a wily US vulture fund, might look like it can be worked on but the Americans insist that the Portuguese government, aka the taxpayer, indemnifies it against hidden problems, and there are bound to be plenty of them as bankers in general, and Portuguese bankers in particular, have vague, dizzy spells when getting too close to the truth.
Hence the figure of zero euros which is being bandied about today, partly in jest but underlying this city humour is the dawning reality that noone is going to take on Novo Banco in its current state unless there are some heavy-duty guarantees.
This must be the end for Carlos Costa whose cosy pre-2014 relationship with BES’s chief executive, the now-disgraced banker Ricardo Salgado, ensured the regulatory role of the Bank of Portugal was forgotten while Salgado picked up the lunch bills.
The American funds, Lone Star and Centerbridge-Apollo are still in the race to buy Novo Banco but will have read of the offer made public yesterday by a former Goldman Sachs partner, a certain Sr Antonio Esteves, who has offered €15 billion to take over Portugal’s banks’ bad debts. Click here
After the relief of walking, unscathed, from a meeting with European finance ministers today, Portugal’s Finance Minister Mario Centeno was asked about the Novo Banco sale. He gave the standard waffle about ‘to be sold with no cost to the taxpayer.’
Things have moved on and the liklihood of the taxpayer and the Resolution Fund making signifant losses totalling an eye-watering €4.9 billion are closer than he cares to imagine.
Alternatives are to keep Novo Banco under State control so the real damage can be hidden away until people stop writing about it, or to wind it up this August when the EU agreed lifespan for this ‘bridge bank’ expires.
Centeno now urges ‘speed’ in the Novo Banco sale process. Why? Speed is something Mr Magoo is not good at, but even when he does make up his mind, it invariably has been to make the wrong decision.
