Novo Banco Gets Partial CCA Payment but Capital Uncertainty Remains
This commentary summarises recent developments related to Novo Banco, S.A. (NB or the Bank) and the capital support received under the Contingent Capital Agreement (CCA).Summary highlights of the commentary include:
• The CCA payment received was below the expected amount of EUR 429 million, as well as below the original CCA call of EUR 598.3 million.
• The Resolution Fund retained an amount of EUR 112 million which could be paid to the Bank at a later date, depending on the findings of a supplementary analysis on the Bank.
• As a result of the lower payment under the CCA, the Bank’s phased-in CET1 and total capital ratios, at end-Q1 2021, declined by around 40 and 50 bps QoQ, respectively, to 10.9% and 12.8%.
“DBRS Morningstar currently rates Novo Banco’s Long-Term Issuer Rating at B (high), with a Negative Trend. Improving the capital position is a key factor for the ratings, therefore DBRS Morningstar will continue to monitor the developments around the CCA and capital support as well as any other implications for the Bank’s strategy and balance sheet” said Nicola De Caro, Senior Vice President at the Global Financial Institutions team.
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