Portugal's Novo Banco hits record profit ahead of IPO

By Sergio Goncalves

LISBON (Reuters) -Novo Banco, Portugal's fourth-largest lender, reported a record net profit of 744.6 million euros ($804 million) on Thursday, ahead of a planned initial public offering, and said it would begin distributing 60% of earnings in dividends.

CEO Mark Bourke said the bank's performance positioned it for an IPO and told Reuters it would likely be "at the upper limit of the 25%-30%" range, but the exact stake would depend on market conditions and shareholders.

U.S. private equity fund Lone Star, Novo Banco's biggest stakeholder, had been considering an IPO or a full sale, sources with knowledge of the matter told Reuters in September.

Bourke said, for Lone Star, "it is rational to keep all options on the table", but that he has always advocated an IPO.

The good performance, the bank's medium-term prospects, and that it has set targets and met them "are all building blocks" for the IPO's success.

Net profit was up 0.2% last year, attributable in part to an increase in interest margins and commissions that offset higher provisions, the lender said.

Authorities blocked Novo Banco from making dividend payouts from 2017 until the end of 2025, but, in December, its stakeholders reached an agreement to lift that ban.

On Thursday, it said it expected to have "more than 3.3 billion euros of available capital for distribution over the next three years".

It will propose a dividend of 224.6 million euros, or 60% of the earnings it booked in the second half of 2024, adding additional payouts could be adopted in future, subject to approvals.

Novo Banco's core Tier-1 (CET1) capital ratio stood at 20.8% at the end of 2024, more than double the central bank's minimum requirement, but the medium-term target is now between 13% and 13.5%, it said.

Novo Banco was carved out of the collapsed Portuguese bank BES in 2014. Since 2017, it has been 75%-owned by Lone Star, with the remainder held jointly by the Portuguese banking resolution fund and the state.

($1 = 0.9261 euros)

(Reporting by Sergio Goncalves; Editing by Jan Harvey, Rachna Uppal and Barbara Lewis)