Portuguese Lender Novo Banco Slumps to a €1.4 Billion Loss

Portuguese lender Novo Banco has reported a net loss of €1.4bn, underlining how southern European banks are still struggling to repair their balance sheets after its new US private equity owners booked big provisions on bad loans, the Financial Times reported. The beleaguered bank, born out of the wreckage of Banco Espírito Santo and taken over by Lone Star of the US last year, said it would draw €792m of previously committed funding from a resolution fund owned by Portugal’s other banks. Novo Banco said the fresh capital injection, half of which is being paid by a government loan to the resolution fund, would allow it to boost its common equity tier one ratio — a key benchmark of balance sheet strength — from 12 per cent to 12.8 per cent. The announcement prompted an angry response from a group of the bank’s bondholders, who tried to block the sale to Lone Star and have taken legal action in Portugal over the losses they suffered on some of their investments. Read more. (Subscription required.)