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Portugal puts off bank sale, unhappy with bids

Portugal’s central bank said Tuesday it was postponing the sale of Novo Banco, created as part of the rescue of BES bank, judging the three offers it received as unsatisfactory.

“The Bank of Portugal’s Board of Governors decided to interrupt the sale of Novo Banco” given the current situation in which there are “considerable elements of uncertainty,” the central bank said in a statement.

Novo Banco was created from the ashes of BES, once one of Portugal’s largest lenders, but which collapsed after reporting a record loss last year and its three holding companies declared themselves insolvent amid accounting fraud allegations.

BES threatened to drag down Portugal’s economy, which had only gingerly emerged from a three-year bailout, prompting the government and the European Union to swiftly come to the rescue.

The good assets of the ailing bank were transferred into Novo Banco as part of a 4.9-billion-euro ($5.5 billion) bailout of BES.

But the Portuguese central bank’s effort to quickly sell the bank was undermined by the uncertainty caused by new stress tests to be conducted by the European Central Bank in the coming months.

The ECB review could result in more money needing to be piled into the bank, thus making potential investors cautious.

The Bank of Portugal said it planned to resume the sale of Novo Banco when its recapitalisation needs were known and “when there are favourable conditions for obtaining offers close to the target price” it had set.

Three investors had submitted bids to take over Novo Banco: the Chinese insurance and banking group Anbang, Chinese conglomerate and investment group Fosun, and the US investment fund Apollo.

The postponement of the Novo Banco’s sale means it will not happen until after the October 4 general election, and could wreck the government’s efforts to keep a lid on the public deficit.