Bad credit disposals represent losses of €106 million to Novo Banco

Portugal’s Novo Banco confirmed the sale of a non-performing loans (NPL) portfolio originally valued in €2,732 million to an international fund for €193 million. This operation represents a € 106 million loss-making in 2019 results but will have a positive impact in the bank’s capital, with its NPL ration shrinking from 20.7% to 15%.

In cause, a portfolio of NPL and related assets, including securities – real estate or shares -, among others, that were previously arranged in the so-called Nata II Project. The buyer is a society owned by the US asset management group David Kempner European Partners.

However, the dimension of the now sold portfolio ended to be smaller than the € 3 billion initially estimated, since there were excluded ten cases with a combined original value of € 309 million, for which the bank believes it can receive individual biddings with a more attractive value. The information was released by the bank in a note, where it explains that this is still the largest transaction of its kind to be completed in Portugal.

The loans now sold correspond to assets identified as high-risk and which losses could unleash further capital injections from the State. Among these assets, inherited from the extinct BES, there were credits borrowed by companies as the Ongoing or the construction group Moniz da Maia.

In a note, Novo Banco states that with such deal «another relevant step in the process of non-performing assets disposal was given, allowing the bank to accelerate its reduction».

The credits and assets sold had a nominal value of € 2,732 million and a gross book value of € 1,713 million. The difference among these figures is explained by the fact that the original values include liabilities, guarantees and writte-offs. The sale was closed by only €191 million, representing a discount of 89% from the assets’ book value, but of only 35% from the net value, meaning that the bank had already recognized significant impairment losses in these.

Original Story: Observador |  Author: Ana Suspiro 
Photo: Novo Banco site
Translation and Edition: Prime Yield