State can be called to inject almost €700 million in Novo Banco, again

Portugal’s Novo Banco, the ‘good bank’ created out of extinct BES toxicity has failed to fly, or even hobble.

The bank has just presented its results for the nine-month until September and the figures were worse than the expected.

«Consolidated results have worsened in a substantial way», writes Diário de Notícias – outlining ‘an accumulated loss of €572.3 million to the end of September. That’s 46% more than losses for the same period last year.

The government «had expected to inject €600 million euros into the bank (via the Resolution Fund) in 2020, due to the losses the bank reported this year, DN adds – but «in the end Novo Banco’s financial situation is worse than it seemed. Again».

The European Commission «estimates that the State will be called to inject €653 million, minimum, next year because of failings to balance capital ratios. (Finance minister) Mário Centeno forecast €600 million», the paper explains.

Grupo Novo Banco hasn’t specified exactly how much money it will request from the Resolution Fund – which DN stresses «is the property of Portuguese banks but doesn’t have the resources necessary to keep injecting this level of funds, so has to borrow from the State».

The country will have to wait for the results of the last three months of 2019 before Novo Banco formulates its «request».

As was explained when the bank was ‘sold’ to US equity fund Lone Star in 2017, Portuguese taxpayers are tied to helping recapitalise the bank to the tune of a maximum of €3.89 billion euros.

The figure was always touted as «the worst case scenario». But fast-forwarding to 2019 shows the financial situation «just continues to worsen», says DN.

«Just to have an idea, since 2014 – the year of BES’ implosion – to September this year, Group Novo Banco has presented cumulative losses in the order of €6.55 billion».

Whatever happens in the future, says the paper, «the negative consequences for the public purse are already substantial».

Original Story: Portugal Resident | Natasha Donn
Photo: Site Novo Banco
Edition: Prime Yield