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Novo Banco’s Losses Worsen to €419.2m before Sale to Lone Star

20 November 2017

The bank led by António Ramalho registered losses of 419.2 million euros in the first nine months of the year.

Novo Banco posted losses of 419.2 million euros in the first nine months of the year. The performance, according to the bank, is due to a deterioration in operating income and net interest income. These were the last statements presented as a transition bank since its sale to Lone Star.

“The Novo Banco Group posted a before-tax result of -355.6 million euros, 34.7% better when compared to the same period in 2016.” In the first nine months of last year, the result was 544.5 million euros. “However, given the decision not to register additional deferred taxes, the bank posted a net result of negative €419.2 million in the first nine months of 2017, 8.9% worse than the same period [of €384.8 million], a statement sent by the bank to the CMVM read.

According to figures released by the bank, the operating result was 207.6 million euros, which is below the 217.7 million registered in the same period last year. The banking institution headed by António Ramalho explains that the deterioration of the financial margin contributed to the negative results. But that was offset by an “increase in commissions,” which rose 12%.

There was a reduction of “around 2.1 billion euros” in the credit portfolio, in which the bank highlighted a decrease of €1.6 billion in NPLs. The institution also pointed to an increase in impairments on the order of 563.2 million euros. “Even so, about 200 million euros less than” the same period of the year before. “Thus, the impairments on NPL rose 3.8% to 51.9%.”

Deposits also increased 5.3%. That is “a growth of about €1.3 billion in the year”, the bank stated. “Total customer funds amounted to 36.6 billion euros, corresponding to a year-on-year growth of 1.6%,” it reported. The financial institution also managed to reduce costs by 12.4%, “specifically general administrative expenses, which decreased by 13.7%.”

Ratios deteriorate but subsequently improve with sale to Lone Star

With the worsening of losses, capital ratios fell. “Novo Banco ended the third quarter with a CET1 capital ratio of 10.9% and total capital of 11.1%, which, fully implemented, would be 9.7% and 10.1% respectively,” the bank explained.

However, 18 days after these results, the bank was sold to the U.S. fund Lone Star. In this process, institution led by António Ramalho was re-capitalised.

“Thus, on October 4, the bank successfully undertook an Liability Management Exercise (LME), with no reduction to equity, which allowed an estimated upfront capital increase of €217 million and, on October 18, a capital increase of €750 million carried out by the company Nani Holdings (which will be reinforced by another €250 million by the end of the year), significantly strengthening the bank’s capital,” the statement read.

Original Story: Economia Online – Rita Atalaia

Translation: Richard Turner