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Portugal's ailing Novo Banco hopes for profits in 2021

LISBON, May 19 (Reuters) - Portugal’s Novo Banco, which was carved out of the collapsed Banco Espirito Santo, said on Wednesday it expected to complete its restructuring this year and start making profits as it continues to slash non-performing loans and costs.

Chief executive Antonio Ramalho said he expected the bank “to fulfil all the goals” of the restructuring imposed by Brussels in 2017 and “increase the value of Novo Banco” for its two shareholders.

Novo Banco, which is 75% owned by U.S. private equity firm Lone Star and 25% owned by the Resolution Fund, posted a 1.3 billion euro ($1.59 billion) loss in 2020 after huge provisions for credit and asset risks.

“I expect that Novo Banco will start making profits in 2021 and generating capital,” Ramalho told a parliamentary committee. “It is great...but it is also obvious that it cost Portuguese (taxpayers).”

Lone Star acquired the majority stake in Novo Banco in 2017, with the sale contract stipulating that the Resolution Fund must inject up to 3.9 billion euros if certain losses occurred from the sale of toxic assets inherited from the collapsed BES.

The cash injection is meant to keep the bank’s solvency ratios at required levels.

Novo Banco has been offloading bad loans, real estate and non-core assets under restructuring commitments agreed with Brussels, and the Resolution Fund has already injected 3 billion euros into the bank to cover those losses.

Remalho said the strategy was to continue to clean up the bank’s balance sheet, reduce non-performing loans and costs. ($1 = 0.8191 euros) (Reporting by Sergio Goncalves; editing by Emelia Sithole-Matarise)

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