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Novo Banco Looks to Reduce NPL Ratio to 5%

2 March 2020 – The CEO of Novo Banco, António Ramalho, is considering further portfolio sales to reduce its holdings of non-performing loans (NPLs) by 1.7 billion euros, thereby reaching a consolidated NPL ratio of 5%.

During a press conference on the bank’s annual results for the year 2019, Ramalho stated that Novo Banco had posted consolidated losses of 1.059 billion euros. At the same time, ‘recurring’ activity corresponding to the “good” bank showed a positive net result of €177.6 million.

At the conference, the executive stated, “When you have an 11.8% NPL ratio, after a huge amount of work, unparalleled in Europe, to reduce that ratio from 36.6%, we’re still not there. We will only be there when that ratio is below 5%, the ECB’s guidance for high-quality banks. This means that we still have to make additional efforts, which will affect next year’s operating accounts and which we will maintain as an absolute priority, leaving no Legacy in 2021.”

All told, the bank, which is controlled by the US fund Lone Star, has managed to reduce its portfolio of real estate from €3.5 billion in 2017 to €2.2 billion, a fall of 37%. Novo Banco also reduced its holdings of NPLs €6.739 billion to 3.3 billion euros, a nearly fifty-percent drop from 22.4% in December 2018 to 11.8% in December 2019.

From 2017 to 2019, Novo Banco reduced its legacy by €10.2 billion, through sales outside of Portugal, the sale of non-performing loans (Nata I; Nata II; Albatros and individual sales and restructuring); and through the sale of real estate assets (Sertorius; Viriato; Albatros and individual sales).

Original Story: Jornal Econômico – Maria Teixeira Alves & António Vasconcelos Moreira

Translation/Summary: Richard D. Turner