(Bloomberg) -- Novo Banco SA said it’s “optimistic” on its shareholders reaching an agreement that would allow the Portuguese lender to pay dividends, a step that’s needed before a possible initial public offering.
“We remain very optimistic,” Novo Banco Chief Executive Officer Mark Bourke said in an interview on Thursday. “Parties are at an advanced stage of negotiations.”
Novo Banco posted its first profit in 2021 and its net interest income climbed as central banks raised interest rates. As part of its recovery, the bank previously had to shed assets and sell soured debt to reduce its non-performing loan ratio, which was one of the highest in Europe after Novo Banco emerged from the breakup of Banco Espirito Santo SA a decade ago.
The Lisbon-based lender also received capital injections from Portugal’s Resolution Fund as part of the contingent capital agreement that was set up when private equity firm Lone Star bought 75% of Novo Banco in 2017. As part of that agreement, Novo Banco has a dividend block that’s scheduled to expire by the end of 2025 at the latest, and the CEO has said it’s possible for the bank’s shareholders to agree to lift it earlier.
Besides Lone Star, the bank’s other shareholders are Portugal’s government and the Resolution Fund, which is run by the Bank of Portugal.
The CEO said on Thursday that he believes that Novo Banco, its majority shareholder Lone Star and the Resolution Fund are “very close” to being ready to end the contingent capital agreement.
Ending the contingent capital agreement would put Novo Banco in a position to “finalize” its balance sheet, Bourke said. The normal windows for IPOs would usually be in the second quarter or in the third quarter after the summer.
The CEO has said that Novo Banco has been meeting with investors in the Middle East, Europe, and the US.
“The base case continues to be an IPO,” Bourke said on Thursday. “But there is no possibility that all options would not be on the table at all times for somebody like Lone Star.”
Novo Banco also said earlier on Thursday that its non-performing loan ratio fell to 4% at the end of September from 4.1% at the end of June. The bank is in the process of selling a non-performing credit portfolio known as Project Pegasus. It’s in the non-binding offer stage, and Novo Banco has received seven or eight bids, Bourke said.
(Adds CEO’s comment on sale of a non-performing portfolio in final paragraph.)
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