Novo Banco to lay off hundreds more and close 73 branches

In another week of very bad news for the bank that staggered from the ruins of the BES debacle, workers have heard that another 400 are to be laid off while a new round of cuts will close the doors on another 73 branches.

With losses for the last year “about to be released” but expected to be in the region of €1 billion, reports SIC, it is now a given that the State will have to plough yet more (taxpayers’) money into this financial morass.

But that is not all: the clique of major-league investors who have launched a social media campaign to try and embarrass Portugal into redressing damages caused them in the Bank of Portugal’s retroactive €2.2 billion bond dump (click here) has upped the ante.

The Novo Note Group is calling on MPs to insist the Bank of Portugal’s governor Carlos Costa be called back to parliament “to explain the decision” that not only caused their members millions of euros of damages but “increased the costs of Portugal’s sovereign debt”.

Novo Note’s push follows a damning report, released earlier in the week, that in the words of one regional news website “shows Mr Magoo (the disparaging nickname given Costa by Bloco de Esquerda MP Catarina Martins) was asleep at the wheel” when overseeing key matters at the so-called “good bank” (which has actually only declared losses since its inception).

The report highlights “significant deficiencies” in the management of credits and in informing “on the risk of operations of Novo Banco, even after the Bank of Portugal had assumed control”, explains Observador.

Set against the admission recently by under-secretary of state for finance Mourinho Félix that the government will almost certainly be injecting new millions into the ‘good bank’ before the year is out (click here), this new bend in the bumpy road does not augur well for anyone. But the fallout could also affect the image of the country, says the Novo Note Group in a letter to MPs – and that is what it is essentially banking on as the trump card in its campaign.

Cited by Dinheiro Vivo, the group explains that Bank of Portugal’s decision-making has “exposed Portugal and the Portuguese economy to an elevated market risk: when new shocks and market crises occur, the cost of sovereign debt will without doubt be impacted more violently that would be the case if the Bank of Portugal had not adopted the Retransfer Decision (official name for the bond dump) and directly discriminated against institutional investors”.

PIMCO and Blackrock, Novo Note’s main investors -and usually described as “two of the world’s biggest fixed income investors” – “believe that the parliamentary hearing of Carlos Costa is essential for the true extent of the damage caused by the Retransfer Decision to become evident”, adds DV, stressing that the group says it is “available to continue working with the Portuguese authorities to restore confidence in the Portuguese market” once a way has been charted to redress damage.

But as all this is playing out, SIC television last night dropped the bombshell about further job cuts and branch closures.

The bottom line is that 30 branches are to be closed by the end of April, another 43 by the end of the year and employees over the age of 55 will be encouraged to take early retirement.

Up to 400 bank staff will be shed this year (not by 2021 as previously agreed, adds Lusa) – which is almost exactly the same number as left their posts in 2016.

Novo Banco’s majority shareholder since last year is the American equity fund Lone Star, but the government is bound to inject money as and when is deemed necessary – a detail that continues to receive resounding criticism from MPs of all parties (click here).