Quote from Alex bobby on June 14, 2025, 6:23 AM

French Lender BPCE to Acquire Portugal’s Novo Banco in Major Cross-Border Merger

In a move that signals renewed momentum for cross-border banking mergers in Europe, French financial giant BPCE is set to acquire a 75% stake in Portugal’s Novo Banco from US private equity firm Lone Star, in a deal valuing the Portuguese lender at €6.4 billion. The acquisition marks one of the largest European banking transactions in recent years and underscores a broader trend of consolidation and strategic geographic expansion among major financial institutions.

A Strategic Turning Point

The deal, which is expected to close in the first half of 2026 pending regulatory and shareholder approvals, marks a new chapter for Novo Banco—one that solidifies its transformation from a crisis-born institution into a regional banking powerhouse.

In a regulatory statement, Novo Banco CEO Mark Bourke said:

“This transaction enhances our ability to serve Portuguese families and businesses, deepens our commitment to the national economy, and secures a long-term future built on strength, trust, and shared ambition.”

The acquisition also highlights BPCE’s strategy to diversify its retail banking operations beyond France and increase its exposure to dynamic but underserved markets. By adding Portugal to its core operations, BPCE is positioning itself to become a stronger, more competitive player in southern Europe.

The Legacy of Banco Espírito Santo

Novo Banco was founded in 2014 following the high-profile collapse of Banco Espírito Santo (BES), one of Portugal’s oldest and most prestigious banks. As part of a government bailout amid the eurozone financial crisis, the Portuguese central bank carved out the "good bank"—Novo Banco—from BES’s toxic assets, which were placed in a separate "bad bank."

Initially state-owned, Novo Banco was privatised in 2017 when Lone Star acquired a 75% stake by investing €1 billion in capital. The remaining 25% stake remains in the hands of Portugal’s Resolution Fund, tied to the state.

Although Lone Star’s tenure was marked by financial turbulence—including large legacy losses from bad loans—Novo Banco returned to profitability in 2021, turning a new leaf in its operations. As of its latest earnings report, the bank boasts €43.72 billion in net assets and a 21.7% return on tangible equity, positioning it as a key player in Portugal’s financial ecosystem.

BPCE Eyes Full Ownership

While the current deal grants BPCE a controlling interest, the French banking group has already initiated discussions with Portuguese authorities about acquiring the remaining 25% state-held stake, which could eventually lead to full ownership.

Such a move would significantly deepen BPCE’s footprint in Portugal and complement its broader ambition to extend beyond domestic borders in an increasingly competitive European banking landscape. Importantly, it would also increase BPCE’s exposure to variable-rate loans, which are far more prevalent in Portugal than in the French market—creating potential for interest margin gains in the current high-rate environment.

A Thwarted Rival Bid

BPCE was not the only contender. Spanish banking group CaixaBank, which already owns Portuguese lender BPI, also explored a bid for Novo Banco. However, according to insider reports, Lisbon hesitated to allow increased Spanish control over its domestic banking system, likely fearing an over-concentration of foreign—particularly Spanish—influence in key sectors of the economy.

This made BPCE’s offer more politically palatable and strategically aligned with Portuguese long-term financial sovereignty, tipping the scales in favour of the French bidder.

A Broader Trend: Cross-Border Consolidation

The BPCE-Novo Banco transaction fits into a broader pattern of renewed consolidation in European banking, especially after a long period of caution following the 2008 financial crisis. Across the continent, major lenders are engaging in expansion efforts:

• UniCredit is expanding its presence in Germany and Greece with stakes in Commerzbank and Alpha Bank, respectively.
• BNP Paribas has taken over AXA Investment Managers, adding strength to its asset management arm.
• In Spain, BBVA has launched a hostile takeover bid for its rival Banco Sabadell, which could reshape the Iberian banking sector entirely.

These moves reflect both the shifting regulatory landscape and improved balance sheets across the financial industry, making bold expansion more feasible than it was a decade ago.

Looking Ahead

As BPCE prepares to enter a new chapter with Novo Banco, all eyes will be on how the French bank integrates its new acquisition, both operationally and culturally. If the remaining 25% state-held stake is successfully acquired, BPCE would gain full control of a lender with growing profitability, local trust, and a solid client base.

Meanwhile, for Portugal, the deal offers renewed foreign confidence in its financial sector and a potential injection of capital, innovation, and broader service offerings.

The successful completion of this deal could very well trigger further cross-border transactions in the European banking sector, setting a precedent for other mid-tier national banks seeking long-term viability through strategic alliances or acquisitions.
France’s BPCE to acquire 75% of Portugal’s Novo Banco from Lone Star in a €6.4bn deal, marking one of Europe’s biggest banking mergers and signalling a wave of cross-border consolidation.

Conclusion

The acquisition of Novo Banco by France’s BPCE marks a significant milestone in European banking, symbolising not just the revival of cross-border mergers but also growing confidence in Portugal’s financial system. For BPCE, it’s a strategic expansion into a dynamic retail market, while for Novo Banco, it represents the culmination of a decade-long recovery from crisis toward stability and profitability.

As European banks increasingly look beyond their borders for growth and resilience, this deal underscores a broader shift in the industry—one where regional integration, consolidation, and long-term vision take centre stage. If completed as planned, this merger could serve as a blueprint for future transactions across the continent, ushering in a new era of cooperative strength in European finance.