A bad-tempered takeover battle, and other troubles
BY PORTUGAL’S undemanding standards, Banco BPI is in decent shape. Two Portuguese lenders, Banco Espírito Santo (BES) and Banif, have collapsed in the past two years. In September the government called off the auction of Novo Banco, the “good” bank salvaged from the wreckage of BES, because the bids were too low. As the euro crisis battered Portugal, BPI also suffered. But the country’s fifth-largest bank, with assets of €40.7 billion ($46 billion), returned to profit last year. (It was due to report earnings on April 28th, after The Economist went to press.) Its bad-loan ratio is 4.9%; the national average is a dismal 12%, says Fitch, a rating agency.
BPI’s biggest shareholder, CaixaBank, the third-largest lender in neighbouring Spain, sees promise: this month it made its second offer in just over a year for the 55.9% it does not already own. CaixaBank asserts that it can squeeze BPI’s cost-income ratio from 74%, far above the 57% average of its rivals, to below 50% in three years.
Yet the bid reflects urgency as well as hope. CaixaBank and Santoro Finance, BPI’s second-biggest shareholder with a 18.6% stake, have been wrangling over how to comply with the European Central Bank’s insistence that BPI reduce its exposure to BFA, an Angolan bank of which it owns 50.1%. To BPI, BFA is not small beer. Last year the Angolan bank contributed €135.7m to BPI’s net profit of €236.4m. Its return on equity, 32%, dwarfed the Portuguese business’s 5.2%.
Santoro is controlled by Isabel dos Santos, daughter of the president of Angola (a Portuguese colony until the 1970s) and reputedly Africa’s richest woman. Unitel, a mobile-telecoms operator which Ms dos Santos controls jointly with the Angolan state oil company, owns the rest of BFA. Talks eventually centred on the obvious: CaixaBank would get a majority of BPI and Unitel of BFA. On April 10th, the ECB’s deadline, BPI said a deal had been struck.
A week later BPI said Santoro had “disrespected” the deal, requesting an unacceptable change.
The Spaniards made their new offer, asking the ECB to put sanctions on hold. The bid is conditional on the scrapping of a legal cap on shareholders’ votes at 20%, which helped Santoro to block last year’s takeover attempt. Portugal’s government promptly passed a law to ease the lifting of the cap.
Santoro denied that a deal had been finalised, and damned the change in the law as “clearly partial”. Expresso, a Portuguese weekly, reported that Angola’s government was contemplating limiting BPI’s voting rights at BFA, thus handing control to Unitel, and even stopping expatriate Portuguese workers sending money home.
António Costa, Portugal’s Socialist prime minister, wants BPI’s future settled swiftly. He has plenty of other banking troubles. Weeks after his minority government took office in November, he spent €2.2 billion bailing out Banif (since sold to Santander, another Spanish bank). In December the central bank transferred nearly €2 billion of bonds from Novo Banco to the “bad” bank where BES’s toxic assets had been dumped. Furious investors are suing. Novo Banco remains unsold.
Worried about the drag of ailing lenders on the economy, Mr Costa wants to create another bad bank, like that recently set up in Italy, to house non-performing loans. This would free banks to lend to viable companies, he says, but spare the taxpayer, as it would be financed by the private sector with the help of some state guarantees. Where the private money would come from is unclear. As Elena Iparraguirre of Standard & Poor’s, a rating agency, points out, in Italy bigger, stronger banks are supporting smaller, weaker lenders. In Portugal “the weaker ones are the largest”.