Novo Banco's executive president António Ramalho, last month the focus of an investigation by the European Central Bank over the issue of his "relationship” with Luís Filipe Vieira, former president of Benfica football club,

Novo Bank “stuck” with Russian Gazprom debt; “stands to lose millions of euros”, say reports

Depending on which news outlets one reads, Portugal’s Novo Banco is said to be seriously exposed to Russian debt, standing to lose many millions of euros.

Tabloid Correio da Manhã says this morning that the Portuguese banking system “runs the risk of losing €133 million in financial investments in Russian debt”.

National banking exposure to Russian debt is revealed by BIS – the Bank for International Settlements – which does not differentiate between banks.

Correio da Manhã, and indeed Observador has, however. 

It would seem from their reports that the only Portuguese bank exposed to Russian debt is Novo Banco (see update below). 

In other words, the bank that has cost Portuguese taxpayers billions of euros, looks like it has just lost €133 million of them (if you read Observador, the loss is slightly less: 149 million dollars, or 132 million euros).

CM explains: “Novo Banco, at this moment, is the only case known by national financial entities with exposure to Russian debt.

“It will have an exposure to shares in Gazprom – one of the largest fuel companies in the world – of around €20 million. Yesterday, the majority of European markets registered new losses, due to sanctions imposed on Russia as a result of the country led by Putin having invaded Ukraine”.

Because of the increased risks caused by the war, Novo Banco “tried to sell its shares in Gazprom, but ended up not being able to”, the paper continues.

Observador agrees, but suggests Novo Banco’s exposure to Gazprom is more in the region of €10 million (other news outlets seem to be reporting more along the lines of CM’s €20 million).

Whatever the figure, Observador’s research has also failed to come up with any other Portuguese bank invested in Russian debt.

A week ago, journalist Edgar Caetano wrote: “Observador questioned the principal banks in Portugal on the level of exposure to Russia (and to Ukraine). BPI responded that “the bank has no direct or indirect exposure to Russian and/ or Ukrainian assets”. The same line came from (State Bank) Caixa Geral de Depósitos: “we do not have exposure to these countries”, an official source of the public bank said. MillenniumBCP which has an important presence in Poland indicated that it “does not have relevant exposure to the referred geographies”, meaning Russia and Ukraine. Novo Banco had not responded at time of publication of this article”.

CM attempts to explain what ‘exposure’ means to its lay readers, saying this can come in “two kinds of products: public debt, emitted by the State, and corporate debt, emitted by companies.

“Whatever the case, these financial investments will have been attracted by the payment of high interest rates. In these products, according to sources in the financial sector, the average interest rate will fluctuate between 5% and 7% per year. For example, in 2020, Gazprom issued debt with an interest rate of 6.75%.

It was only a couple of weeks ago that Novo Banco announced that in spite of its profits of around €200 million this year, it ‘would be needing more money’ from the Resolution Fund (essentially meaning the State/ taxpayers) to help “replace capital ratios”.

Portugal’s finance minister João Leão – not tipped to remain in his role when the new government finally forms – told reporters shortly afterwards that, as far as he is concerned, there is absolutely no necessity to give Novo Banco any further cash injections at all.

Since this text went online, the Resident has been approached by the official spokesperson for Novo Banco who told us: “Novobanco does not have any exposure to the sovereign risk of Russia and Ukraine. And what corporate risk it has is irrelevant and completely immaterial to its bond portfolio (over 10,000 million euros!!) and is centered on subsidiaries of companies in these geographies in the European Union or the United Kingdom where we do not anticipate any significant losses”.

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