Portugal Resists Expansion of Spanish Banks' Presence Further

Portugal is pushing back against the increasing presence of Spanish banks within its financial sector. This resistance aims to safeguard the country’s economic sovereignty and protect local banking institutions from foreign dominance. Portuguese regulators and policymakers are cautious about allowing further expansion by Spanish banks, reflecting concerns over market competition and national control. The move highlights ongoing tensions in cross-border banking relations as Portugal seeks to maintain a balanced and competitive financial landscape.

Portugal’s government has expressed that Spanish banks should not further expand their footprint in the Portuguese banking sector. Finance Minister Joaquim Miranda Sarmento shared in an RTP3 interview that Spanish banks currently account for around one-third of Portugal’s banking market. He emphasized that this share should not grow due to concerns about market concentration and dependency risks.

Novo Banco SA, a Portuguese lender mostly owned by US private equity firm Lone Star, is reportedly preparing for a possible initial public offering. Sources told Bloomberg News that Spain’s CaixaBank SA is among potential buyers interested in acquiring Novo Banco.

As Portugal’s fourth-largest bank, Novo Banco turned profitable in 2021 and benefited from rising interest rates. The bank had previously offloaded assets and bad loans to reduce its high level of non-performing loans, which was one of the highest in Europe following the collapse of Banco Espirito Santo a decade ago.

Sarmento stated that the decision to sell Novo Banco lies with Lone Star, which will consider offers if it decides to place the bank on the market. Spanish banks Banco Santander SA and CaixaBank are already part of Portugal’s top five banks.

The finance minister remarked that it is in Portugal’s interest to avoid excessive reliance on banks from a single country, such as Spain, to prevent overconcentration in the sector. Lone Star owns 75% of Novo Banco, while the Portuguese state holds the remaining 25% through bodies like the Resolution Fund managed by the Bank of Portugal. Novo Banco’s CEO, Mark Bourke, noted that the bank is well into preparing a prospectus for a potential IPO, possibly as soon as June.

Earlier in January, Sarmento mentioned that Lone Star planned to sell approximately 25% to 30% of Novo Banco through an IPO and that the government would not intervene if state-owned Caixa Geral de Depositos SA showed interest in acquiring the bank. Sarmento added that if Caixa decides to pursue Novo Banco, whether alone or with partners, it must present a formal proposal to the shareholders who will then respond.

Caixa Geral de Depositos CEO Paulo Macedo confirmed in February that his bank was evaluating the potential acquisition of Novo Banco. Banco Comercial Portugues SA, Portugal’s largest publicly traded bank, has indicated it might consider transactions related to Novo Banco but remains focused on organic growth.

Research by JB Capital in March estimated Novo Banco’s valuation to be between €5.5 billion and €7 billion. Novo Banco manages roughly €17 billion in corporate loans, €10 billion in mortgages, and €2 billion in personal loans, serving 1.7 million customers as of May.

Banco Espirito Santo, once Portugal’s largest bank by market value, received about €5 billion in rescue funds in 2014 after capital shortfalls emerged from troubled loans connected to the Espirito Santo family’s companies. The Portuguese central bank moved the bank’s deposits and major assets to Novo Banco, with Lone Star injecting €1 billion when it acquired its stake in 2017.

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Source: livemint‍