CGD, BPI, BCP and Santander: what do the competitors say about Novobanco?

In addition to high profits, the round of bank results presentations in recent weeks had another common point: Novobanco. Not everyone was as open about it as Paulo Macedo, who openly said that Caixa Geral de Depósitos (CGD) is analysing “this hypothesis”. But the exchange of barbs between the bankers makes it clear that a lot is at stake and that the deal could structurally change the market. In whose favour?

“We’re analysing that hypothesis”. Paulo Macedo was the clearest of the bankers when asked about Novobanco, which is about to enter the most decisive phase of its sale process.

“We are interested in operations that can have synergies with Caixa, add value and that the total is greater than the sum of the parts”, added the public bank’s leader last Thursday, after announcing record profits of 1.74 billion euros.

May could be the month of the IPO of the bank currently controlled (75%) by U.S. fund Lone Star, but that path could be interrupted if someone goes ahead and writes the cheque with the right number.

But CGD may not be alone in the race. BPI has also expressed interest, albeit in a less declared manner. CEO João Pedro Oliveira e Costa left the matter in the hands of Caixabank. “It will always be the shareholder’s move, not BPI’s, because BPI wouldn’t have the capital for such a move”, said the manager, pointing out that the Spaniards have an “important” track record when it comes to consolidation processes.

“Consolidation is no stranger to Caixabank (…) These moves were made with great rationality, they have to create value for the shareholder, improve the lives of employees and the service of customers. It was along these lines of consolidation that it took a position in BPI. And if we look at BPI’s results over the last eight years, this move shows that this is a possible course of action”, said BPI’s chairman.

BCP could also be a candidate. CEO Miguel Maya was more elusive in his answers to journalists. “We’re not in any race for Novobanco. Every time there’s an operation on the market it’s our obligation to analyse it”, he said. But he didn’t stop throwing barbs and warnings, showing that the Novobanco deal is not completely indifferent to BCP.

Public or Spanish Novobanco?

Whoever buys Novobanco risks taking or reinforcing market leadership with almost a third of the market share in Portugal.

On the other hand, if the buyer is Spanish, it will accentuate the Spanish dominance in the national system — with banks in Portugal with Spanish capital currently accounting for almost 30% of the total.

Recently, the governor of the Bank of Portugal warned of the systemic implications of a possible consolidation process with the public bank. “Caixa is a very important bank, but that also brings responsibility. It’s a business decision with systemic consequences that have to be analysed”, he warned.

In this sense, Mário Centeno was more in favour of an IPO, although he stressed that the final outcome will be determined by the market: “I’d like to have more banks on the stock exchange.”

“I’m not sure what [the governor] means, but it’s still strange, in the European panorama, for a public bank, which is the biggest bank, to be able to buy another bank, the fourth player, and take more than a third of the market”, said Pedro Castro e Almeida, CEO of Santander Totta about a month ago.

Caixa’s leader responded: “Am I worried that Novobanco will end up in foreign hands? I saw the chairman of Santander worried that Novobanco would end up in Caixa. I’m worried if the Spanish bank ends up with a 45% market share”.

Miguel Maya warned that it is “desirable for there to be an appreciation of competition if there is a consolidation operation”. “I wouldn’t think that there wouldn’t be an assessment”, said BCP’s CEO.

Is it worth five billion?

Regarding the potential value of Novobanco, in the region of five billion euros, the leaders of Caixa and BCP were sceptical. “If we applied the multiples I’ve seen in the newspapers, Caixa would be worth between nine billion and 16 billion euros”, replied Paulo Macedo. “Is it worth that amount? I’m more enthusiastic about what BCP is worth”, said Miguel Maya.

Both men also commented on the possibility of Novobanco going public. Paulo Macedo assumed that this outcome would not represent an obstacle to a consolidation process: “If it goes public, I don’t see it becoming an impediment to anything. There are various conditions. And I don’t think that Lone Star will go public if it doesn’t have the final destination of the buyer”.

Miguel Maya, head of the only listed national bank, welcomes the move: “If Novobanco goes public, we’ll be thrilled, it won’t take away from BCP’s value. We’re alone in the market, it will be welcome on the stock exchange.”