Novo Banco to sell €1.2 billion of Bad Loans until the end of the year

Lone Star’s Novo Banco, Portugal’s fourth-biggest bank by assets, aims to sell as much as 1.2 billion euros of non-performing loans (NPL) by the end of the year as it seeks to post its first annual profit in 2021, according to Bloomberg.

Most of the loans were part of a portfolio called Nata 3 that the lender has been preparing for sale before the pandemic crisis, Chief Executive Officer Antonio Ramalho said in a interview. The bank, controlled by Lone Star, now plans to adjust the sale to reflect the adverse market conditions caused by the Covid-19.

Without the pandemic, it would have been natural for us to sell Nata 3 through a single transaction,” Ramalho said. “We now need to figure out a way of adapting to the current situation.” The portfolio includes mortgages, consumer credit and bigger loans.

Novo Banco, which emerged from the breakup of Banco Espirito Santo SA in 2014, has been selling NPL and non-core assets as part of a plan to lower what was once one of Europe’s highest bad loan ratios.

The Portuguese lender’s NPL ratio was just under 10% in July, down from around 33% in 2016. The goal is to reduce that further this year so that it’s in line with other Portuguese banks, Ramalho said. The average ratio across the industry was 6.5% at the end of 2019.

Demand for NPL portfolios has remained “reasonably stable” in Portugal, Ramalho said. Most buyers are long-term investors based in the U.S. or the U.K.

Novo Banco is sticking to its goal of posting a profit for 2021, according to the CEO. The lender reported a 2019 loss of 1.06 billion euros.

The bank has already received about 3 billion euros from Portugal’s Resolution Fund out of the maximum of 3.89 billion euros allowed under the contingent capital agreement that was set up when Lone Star bought 75% of the Portuguese lender in 2017.

Original Story: Bloomberg |Henrique Almeida
Photo: Novo Banco site
Edition: Prime Yield