Novo Banco “risks losing 838 million in Angola” while IMF censures polemic bond dump

In another black week for Novo Banco – the so-called “good bank” that Portugal desperately needs to sell – media reports have exposed a catastrophic ‘mistake’ that saw thousands of euros transferred erroneously to former clients; news that the bank “stands to lose 838 million euros in Angola” and a censure by the IMF on the way the bank’s accounts were made to look ‘better’ by retroactively dumping €2 billion-worth of senior bonds.

With no news on any ‘firmly-committed prospective buyers’ in sight, the first three days of the week could hardly have looked.

Then came more bad news.

Auditors PricewaterhouseCoppers (PwC) announced they doubt Novo Banco will succeed in its target to recover almost 1.2 billion euros in deferred tax assets.

Taking the dismal week in step-by-step, first came the revelation that former customers of BES (the ‘bad bank’ from which Novo Banco was created) had benefitted from “thousands of euros” erroneously transferred into their accounts – and that payback “will not be automatic”.

Público broke the story, explaining that “beneficiaries (of the unexpected largesse) now have to authorise the cancellation of the transfer.

If they do not do this, “only the courts can oblige them to return the money”.

Then came an “alert”, also from PwC that Novo Banco “risks losing” the 838 million that Banco Económico (formerly BES Angola) owes it.

This is not to say that the various loans in place are failing. PwC explained that “the inexistence of audited financial information from the Banco Económico for 2014-2015, the lack of availability of a business plan” to allow them to appreciate Económico’s “capacity” to meet its loans, “the current economic conjuncture of Angola” and the fact that negotiations are underway to “redefine senior bond repayments” simply don’t give auditors the good feeling they were hoping for.

The fact that Novo Banco seems to be banking on recovering 1.18 billion in deferred tax assets is also classified by PwC as “doubtful”.

Then came the IMF ‘bombshell’ – in a week when the IMF was dishing out gloom to Europe in general. This particular ‘bad news’ came in criticism of the way the controversial Novo Banco bond dump was handled (click here).

Admittedly, in this case, the target of the IMF’s displeasure was more Carlos Costa, the Governor of the Bank of Portugal, than Novo Banco itself.

Costa was criticised for creating a new “perception of risk” in the financial sector – particularly when it came to fair treatment. This is something numerous international investors are also claiming, and reparing to fight over in the courts (click here).

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