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French bank BPCE has acquired a majority stake in Portuguese lender Novo Banco in a deal that values the business at €6.4bn and brings a chapter of Portugal’s recovery from the Eurozone crisis to a close.
In one of the largest recent cross-border banking deals in Europe, US investor Lone Star has agreed to sell its entire 75 per cent stake in Novo Banco — a lender the private equity group helped revive from the ruins of the country’s oldest banking dynasty.
Novo Banco was the “good” bank that Portugal’s central bank retrieved from the failing business of Banco Espírito Santo, a 140-year-old lender, in 2014. Fearing BES’s collapse, the central bank split off a “bad” bank that it went on to wind down.
Nicolas Namias, BPCE’s chief executive, told the Financial Times: “This is the biggest [cross-border] operation carried out in Europe for 10 years. This project is about European banking consolidation and creating players that can finance the European economy.”
The acquisition will be financed with BPCE’s own funds and the bank will maintain a common equity tier one ratio above 15 per cent after the announcement, Namias said. The French bank is in discussions with Portuguese authorities about buying the remaining 25 per cent of the business.
The deal is a big payday for the private equity group, which acquired its stake in return for a capital injection of €1bn in 2017 after the Portuguese authorities had spent more than two years trying to sell Novo Banco.
Lone Star’s investment was initially fraught with bad loans pushing Novo Banco to billion-euro losses in its first years under the group’s control, before the lender recorded its first quarterly profit in 2021.
Lone Star said the deal marked the “culmination of a multiyear transformation” of the bank, “establishing itself as one of the most profitable banks in Europe”, with a return on tangible equity above 20 per cent.
Lone Star had also considered a public listing of Novo Banco, Portugal’s fourth-largest bank. The remaining 25 per cent of Novo Banco shares are held by the Portuguese state and the country’s bank resolution fund.
BPCE has embarked on a string of acquisitions under Namias, including the ongoing tie-up of the bank’s asset management arm Natixis with Italian insurer Generali’s, and the acquisition of Société Générale’s equipment leasing business last year.
The acquisition opens a second retail market to BPCE, which operates the Banque Populaire and Caisse d’Epargne banking networks in France. It also increases the proportion of variable rate loans on its balance sheet, compared with the large amount of fixed-rate loans offered in France.
Spanish lender CaixaBank had also been in contention to buy Novo Banco. But it already owns Portuguese bank BPI and Portugal’s finance minister has said the government would not be comfortable with an increased Spanish presence in the sector.
Additional reporting by Olaf Storbeck in Frankfurt
