LISBON, Feb 5 (Reuters) - Bank of Portugal Governor Mario Centeno stated on Wednesday that Novo Banco's proposed initial public offering would be advantageous for the Portuguese banking sector. However, he advised a careful approach towards any additional acquisitions or mergers.
Established in 2014 through a government bailout of collapsed Banco Espirito Santo, Novo Banco is 75% owned by U.S. fund Lone Star, with Portugal's resolution fund and the state holding the remainder.
According to sources familiar with the situation, Lone Star is contemplating both an IPO and a full sale of Novo Banco, valued at around 5 billion euros ($5.21 billion), potentially leading to a merger with another Portuguese bank.
Centeno expressed to Reuters in an interview, "I will see that (IPO) as a good outcome for the functioning and competitiveness of the (Portuguese) banking sector." He highlighted the importance of Portugal's fourth-largest bank going public, as only Millennium BCP is currently listed in the country.
Despite the top five banks in Portugal already controlling over 80% of the country's banking assets, analysts suggest there is room for further consolidation.
Regarding consolidation, Centeno noted, "The market again has to dictate." He stressed the need for caution and careful deliberation to maintain the positive performance of Portugal's financial system in terms of capital, liquidity, and cost-to-income.
Centeno warned against repeating past failed M&A endeavors in the sector, emphasizing the importance of stability for sector sustainability. State-owned bank CEO Paulo Macedo mentioned in June the bank's consideration of various options to retain its market leadership amidst foreign banks' expansion, particularly Spanish ones.
While acknowledging the importance of Caixa as a significant bank, Centeno stressed the need for a thorough analysis due to the systemic consequences of such business decisions.
Other major banks in Portugal include the Portuguese subsidiary of Spain's Santander and Banco BPI, owned by Spain's CaixaBank.
($1 = 0.9599 euros)