JB Capital raises valuation of Novobanco to between 5.5 billion and 7 billion euros

JB Capital has revised upwards its assessment of Novobanco’s value, now placing it between 5.5 billion and 7 billion euros, compared to the previous range of 4.8 billion to 6.2 billion euros (indicated in mid-February), according to a research note sent this Friday to its clients, to which ECO had access.

This revision comes at a decisive moment for the bank led by Mark Bourke, which is preparing to go public in the second or third quarter of this year, in an operation that promises to be one of the largest initial public offerings (IPO) in Europe by 2025. And at a time when Bourke is holding several meetings with investors in London and New York to promote the bank and the IPO.

In its research note, JB Capital justifies the upward revision of Novobanco’s rating with the results for 2024 being above expectations and with the new medium-term goals presented by the bank. “Novobanco’s new plan exceeds our expectations”, says Maksym Mishyn, the JB Capital analyst responsible for the report.

The Spanish financial institution also points out that “Novobanco’s robust profitability (RoTE of more than 20% in the medium term with a tax rate of 18%) should allow it to reach the target of 3.3 billion euros in available capital”.

Among the factors that have led JB Capital to revise its projections upwards are also the average 8% increase in net profit forecasts for the period between 2025 and 2027. “We have increased our forecast for our average net profit for 2025-27 by around 8%”, reads the research note.

This increase reflects a better than expected performance in revenues from net interest income, as well as faster growth in loans granted by the bank. Novobanco’s projected growth in its credit portfolio is also considered “reasonable” by JB Capital, given that “Portugal’s nominal GDP is expected to grow faster”.

Another determining factor for this upward revision was the generous capital distribution policy announced by Novobanco. The bank plans to distribute around “3.3 billion euros between 2025 and 2027”, of which around “2.2 billion will be a combination of cash payments and special dividends or buybacks”, says the JB Capital document. This policy translates into an average annual return of between 11% and 13%, which is higher than the 9% offered by the other Iberian banks analysed by the Spanish house.

The financial results for the fourth quarter also positively surprised JB Capital’s analysts. The research note emphasises that “net income was 5% above our estimates”, driven by stable growth in net interest income and higher revenues from financial operations and other sources.

In addition, the bank recorded year-on-year growth in gross loans of around 3%, in line with its strategic guidelines, with Maksym Mishyn also highlighting significant improvements in the quality of Novobanco’s assets. “The NPL [non-performing loans] ratio fell to 3.3%, significantly better than our previous estimate of 4.1%”.

This positive set of factors thus supports a more optimistic assessment of Novobanco’s near future and reinforces positive expectations regarding the imminent stock market operation.