Improved ratings for Novo Bank potential under prospective French ownership, as acknowledged by Fitch and Moody's.
Picking Up Portuguese Portfolio: BPCE's Acquisition of Novo Banco
The takeover of Novo Banco by the financially robust BPCE group should provide a boost to the evaluation of the Portuguese bank by rating agencies.
Spillin' the Tea about the Economy
Miguel Prado, our Economy Editor, is here to unravel the financial implications of this move.
Gather 'Round:let's Talk about Ratings
Rating agencies have given the BPCE-Novo Banco merger a thumbs up, albeit with some financial repercussions. Fitch Ratings affirmed Groupe BPCE's credit rating at 'A' with a stable outlook post-acquisition. However, Fitch forecasts that the acquisition will shrink BPCE's Common Equity Tier 1 (CET1) ratio by roughly 120 basis points from 16.2% as of end-March 2025[2]. Despite this dip in the capital ratio, Fitch's affirmation demonstrates confidence in BPCE's financial resilience and its capacity to skillfully manage the acquisition without harming its overall credit standing.
Branching Out
The acquisition also widens BPCE's geographical reach, positioning Portugal as its second-largest retail market, and expanding beyond its domestic French market. Novo Banco offers a potential annual net income of over €700 million and displayed robust financial performance, hitting a return on tangible equity surpassing 20%, and showing improvements in profitability, cost efficiency, and capital ratios since its restructuring in 2015[3]. This financial might and expansion potential might earn a nod of approval from rating agencies, as it brings a profitable and rapidly increasing banking institution to BPCE's portfolio.
Why the Price?
The deal sets Novo Banco's worth at an estimated €6.4 billion, marking one of the largest cross-border banking acquisitions in the eurozone in more than a decade. This acquisition aligns with BPCE's long-term strategic growth objectives, a factor that rating agencies favorably consider when assessing credit risk[1][4].
Bottom Line:
Though the acquisition results in a tangible reduction in BPCE's capital ratios, rating agencies like Fitch have maintained a steady and solid rating for BPCE, suggesting trust in the bank's credit profile and the strategic benefits of acquiring Novo Banco. The integration of a financially sound and improving Portuguese bank reinforces BPCE's diversification and income generation, bolstering a positive view from rating agencies[2][3].
The acquisition of Novo Banco by BPCE may draw approval from rating agencies, considering the potential financial benefits that come with expanding into another industry like banking and insurance and establishing a strong presence in the Portuguese market. With the acquisition, BPCE's geographical reach will extend beyond its domestic market, and the acquisition of Novo Banco, with its robust financial performance, could potentially increase BPCE's Common Equity Tier 1 (CET1) ratio by other profitable business opportunities in the banking and finance sector.
