Portugal will inject “a little under 850 million” to Novo Banco this year

  • ECO News
  • 19 February 2018

The Portuguese State, by means of the Resolution fund, will have to inject between 700 and 800 million euros in Novo Banco this year, because the bank registered record losses in 2017.

The Portuguese State should be called once again to help Novo Banco, this time by means of the Resolution Fund and the Capital Contingent Mechanism created when the institution was sold to the North American fund Lone Star. According to the Portuguese newspaper Expresso, the Resolution Fund will have to inject more capital in the bank resultant from the resolution of Banco Espírito Santo, in order to maintain the ratios.

The reinforcement should stand between 700 and 800 million euros, according to ECO’s findings near sources close to the process. This injection is justified by record losses the institution headed by António Ramalho will present in 2017, which should surpass 1,000 million euros. These losses come from a high level of impairments that will fall under the toxic assets that were under the wing of the Fund and the guarantee, which is worth a maximum of 3.89 billion euros.

The capital injection is “substantially lower than the results” and should stand “a little under 850 million euros”, according to statements to ECO made by a source familiar with the portfolio. This reinforcement is no surprise, since it is in line with what was foreseen when the deal was signed. And it will not be the only injection, since it is foreseen that the Resolution Fund might have to help the bank once again in 2019, depending on the results of 2018 — in an amount that should be lower than this year’s injection.

For this year, the amount to be injected — between 700 and 800 million euros — can still vary according to the bank’s results, which will only be known in March. Losses are expected to surpass one billion euros — the worst of its short history, although they may suffer a variation of up to 100 million euros.