Fosun stands to make a capital gain of €2.4 billion from BCP (excluding dividends)

Fosun could secure a €2.4 billion capital gain from its decade-long investment in BCP shares, according to ECO’s calculations. And this is without taking dividends into account.

The Chinese conglomerate is assessing its options for exiting the Portuguese bank’s capital, as reported by the Expresso newspaper, and is said to have already hired advisers to gauge market appetite for a stake of around 20.45%. Without an attractive offer, Fosun prefers to retain its stake in BCP for the sake of the dividends, the weekly newspaper added.

At market prices, this stake is currently valued at around €2.7 billion. Shares in the bank led by Miguel Maya have been climbing year on year since the Covid-19 pandemic, when they were worth less than 10 cents. In trading last Friday, they closed at a price of nearly 90 cents, nine times higher than five years ago.

But Fosun held a stake of nearly 30% in BCP by the end of 2023. It was during this period that the divestment began, with the sale of a block representing 10% of the shares, which brought in €430 million – seen as the Chinese investors’ first step towards exiting the Portuguese bank’s capital structure, in an effort to ease the pressure of high debt.

In practice, this means that the Chinese conglomerate – which in Portugal also owns the insurance company Fidelidade – could receive €3.1 billion from the sale of BCP shares, if we add the transactions carried out two years ago to this one that may now be on the table. An official source at Fosun told Expresso that the company remains committed to the Portuguese market in the long term.

Over €700 million invested

Fosun acquired a stake in BCP in November 2016, at a delicate time when the bank was still repaying the €1 billion bailout requested from the Portuguese state during the troika period through so-called CoCos (contingent bonds). At that point, the Chinese injected €175 million in exchange for a 16.67% stake.

Three months later, in January 2017, in a further capital increase, they invested a further €374 million and strengthened their position to nearly 24%. It did not stop there.

By the end of 2021, the Chinese group already held a 29.95% stake. Over the course of around five years, it will have spent nearly €170 million on acquiring shares in the bank, taking advantage of the fact that they were trading at depressed prices, as was the case during the pandemic, when they were trading at less than 10 cents. For this calculation, we took into account Fosun’s position at the end of each half-year (which is published on BCP’s website) and the average share price over that period.

All in all, Fosun will have invested just over €700 million in BCP. And now it may be on its way out with a ‘profit’ of €2.4 billion from the sale of shares – plus around €260 million in dividends.

So what now?

There has long been talk of a possible exit by Fosun (and also Sonangol, which holds almost 20%) from BCP’s share capital. News that CEO Miguel Maya has taken in his stride with relative calm, because the bank is currently in a “solid position”.

“Given that the bank is in a solid position, it would be normal to see BCP evolve like the major European and US banks in terms of free float: we have 60% and major banks have a free float of 90% or more”, said the CEO following Fosun’s reduction. At that time, the ‘void’ left by the Chinese was filled by American and British investors.

This is a reality, as Miguel Maya points out, with which the European banking sector has long been familiar, with most financial institutions having shareholder structures in which around 90% or more of the capital is held by the public. BCP may well join this list.

BCP expects to achieve profits in excess of one billion euros in the coming years. And the icing on the cake for investors: it has an ambitious shareholder remuneration policy. This year, it will distribute 90% of its profits as dividends (50%) and share buybacks (40%). As Miguel Maya once said: the aim is to have ‘satisfied’ shareholders, as this is the best way to protect the bank.