Deal closed: Novo Banco will no longer receive injections from the State

Finance gave OK to the early end of the agreement with Novo Banco. “It is an important milestone for the Portuguese financial system”, says minister Miranda Sarmento, who says that the State no longer needs to inject more money.

Mainly owned by Lone StarNovo Banco agreed with the Resolution Fund (FdR) and the State to end old disputes and bring forward the payment of dividends of 300 million euros in 2025.

This outcome marks the end of the Contingent Capital Agreement (CCA), created in 2017 to ensure the institution’s financial stability.

The understanding between Novo Banco and FdR provides for the closure of legal disputes and avoids the payment of 73 million euros that the Fund would have to disburse in 2024. Furthermore, Novo Banco will drop a lawsuit related to a 124 million euro tax disputeadding a positive impact on public accounts of around 400 million.

The Minister of Finance, Joaquim Miranda Sarmentowhen , points out that “the closure of the CCA is a important framework for the Portuguese financial system”, by eliminating financial uncertainties and reducing potential future charges of approximately 500 million euros

The payment of dividends, previously scheduled for the end of 2025, will now be brought forward to 2025, benefiting Lone Star, Resolution Fund and State shareholders.

A Lone Star, which owns 75% of Novo Banco, will receive around 900 million euros, while FdR and the State will share the remaining 300 million. The operation will only be possible thanks to a capital reduction at Novo Banco.

With the end of the CCA, the Resolution Fund no longer has capital injection obligations into the bank, which already totaled 3,405 million of the 3,890 million euros initially foreseen, in an attempt to maintain the bank’s capital ratio above 12%, injection crucial for the recovery of Novo Banco after the crisis of the former Banco Espírito Santo (BES).

Lone Star plans to proceed with the sale of Novo Banco in 2025, at a time when it is free from litigation and obligations associated with the CCA.