Novo Banco plans to halve its NPL ratio to 10% until 2020

Portugal’s Novo Banco, controlled by U.S. private equity fund Lone Star, expects to halve its non-performing loan (NPL) ratio to 10% this year or next, putting it on a par with domestic rivals, its chairman told Reuters.

The bank, which emerged from the ruins of Banco Espirito Santo after its collapse in 2014, shed €3.7 billion of bad loans between the end of 2017 and March 2019, leaving it with €6.5 billion worth and reducing its bad loan ratio from 28% to 21.8%.

Chairman Byron Haynes said an additional halving of the ratio was key to the bank’s medium-term plans as Portugal’s third-largest lender by assets needed to align itself with local peers.

«Whether that’s going to be a 2019 or 2020 event, let’s see…we need to continue to take advantage of the good market conditions that exist at this point in time,» he said.

The average NPL ratio in Portugal’s banking sector remains high compared to the euro zone average of around 4.5%.

Novo Banco, 75% owned by Lone Star since October 2017 and 25% by the Portuguese Resolution Fund, has been offloading bad loans, real estate and non-core assets under restructuring commitments agreed with Brussels.

It is currently selling a portfolio of large debtors’ NPLs with a gross book value of more than €3 billion and a real estate portfolio valued at up to 500 million.

«The level of interest has been very high…and we expect these transactions to materialise in the near future,» Haynes said, adding that he also expected the insurance market regulator to approve the €190 million sale of GNB Vida to Bankers Insurance Holdings in the third quarter.

Novo Banco posted a €93 million first-quarter loss due to its balance sheet clean-up efforts but recurring profit rose more than 3% to €85 million with the net interest income jumping 33%.

«The recurrent business is where the growth will come,» Haynes said. «The other one is about how quickly can we de-risk the balance sheet and clean up the legacy issues

Original Story: Reuters | Sérgio Gonçalves |
Photo: Novo Banco site
Edition: Prime Yield