Portugal's Novo Banco agrees to sell Spanish retail network to Abanca

LISBON: Portuguese lender Novo Banco said on Monday it has agreed to sell its retail network in Spain to Spanish lender Abanca as part of its strategy of divesting non-core operations and focusing on its domestic business.

"With this agreement, Novo Banco divests its retail, private banking and small and medium-sized enterprises (SME) operations in Spain, including all 10 branches and employees," Novo Banco said in a statement, without disclosing the sale price.

"This transaction is an important milestone in Novo Banco's strategy to divest its non-core assets and operations," it said in a statement.

The Lisbon-based bank - which emerged from the ruins of Banco Espirito Santo as part of a state rescue in 2014 - has sold its international assets in France, Asia and Cape Verde.

In its 2020 accounts, Novo Banco booked 166 million euros for potential losses with this sale, which was launched in May last year.

"The agreement represents the most suitable exit option for the bank, while ensuring the maintenance of client service and offering attractive long-term prospects for both clients and employees in Spain," it said.

The transaction is expected to have a marginal impact on 2021 net income of Novo Banco and to increase its Common Equity Tier 1 capital ratio by 55 basis points.

Losses at Portugal's Novo Banco widened 25% in 2020 to 1.3 billion euros ($1.5 billion) after provisions for credit and asset risks and the coronavirus pandemic.

Novo Banco ranks as Portugal's third largest bank and is majority-owned by US private equity firm Lone Star with a 75% stake.

The sale is subject to the respective authorities' approvals and closing is expected to occur in the second half of 2021.