Chinese investors vie for positions in the Portuguese banking sector

24 October 2016

Millennium BCP and Novo Banco, two of the largest Portuguese banks and that have an important presence in Portuguese-speaking Africa may soon have Chinese financial companies among their shareholders, through operations that are animating the financial market.

Chinese group Fosun, which already has a diverse portfolio of investments in Portugal, is negotiating taking a stake in Millennium BCP, with a share of about 16.7%, an deal that involves changes that will be decided at the next General Meeting of the bank scheduled for 9 November.

The General Meeting is expected to decide on adjustment to limits on voting rights in Millennium BCP, increasing the limit from 20% to 30%, according to the notice for the next meeting, released last week. This change would meet the conditions set by Fosun, which also include increasing the maximum number of board members.

If it takes a stake in the bank, Fosun will be a partner of Angola’s Sonangol (17.84% of Millennium), the Spanish bank Sabadell (5.07%), Portugal’s EDP (2.56%) and Inter-Group (2.05%).

On 30 July BCP received a letter from Fosun, with a firm proposal to subscribe to a capital increase at a price of not more than 0.02 euros per share, which would allow it to take 16.7% of the bank’s capital and it may increase that stake through operations on the secondary market or capital increases to between 20% and 30%.

Fosun’s move has encouraged investors, with the share price of Millennium BCP recovering in recent sessions, with the bank’s senior officials showing confidence in the success of the negotiations, including the CEO of BCP, Nuno Amado.

Negotiations with Fosun “have some pre-conditions we are currently working on and negotiating. I see it that as a natural thing. I hope they are successful and I see no reason for them not to be,” said Nuno Amado at the beginning of October.

Meanwhile, the China Minsheng group formalised on 11 October a proposal for Novo Banco, if the Bank of Portugal and the Government opt for floating on the stock market, a solution accepted by the authorities if they reject the three direct purchase proposals, involving majority control of the bank – from BPI, Millennium BCP, Apollo/Centerbridge Partners/Lone Star.

According to weekly newspaper Expresso, there have been contacts between the Portuguese authorities and the China Minsheng Financial Holding, and the chairman of the executive commission Sing Wang was in Lisbon at the beginning of October to meet directly with those responsible for the sale – the former Secretary of State Sérgio Monteiro and the central bank team.

The same newspaper said that the operation, in which the Chinese investor could take between 10% and 30% of Novo Banco, currently controlled by the Banking Resolution Fund, a body made up of all Portuguese banks, which injected 4.9 billion euros in the bank in 2014, preventing its collapse.

In the previous operation to sell Novo Banco, China’s Anbang and Fosun made the highest bids for the purchase, but these were still deemed insufficient by the Bank of Portugal.

According to estimates from 2015, the deal would give Chinese investors 15% of the Portuguese banking sector, in addition to 30% of the insurance sector (through Fidelidade, which was acquired by Fosun), and 45% of the energy sector (through CTG, the largest shareholder of EDP).

On his recent visit to China, the Prime Minister of Portugal, Antonio Costa, made use of an audience with the President of China, Xi Jinping, to request more Chinese investment, including greenfield investments, in new areas of industry and ports in Portugal .

“There are new prospects in the port sector, especially with the great Chinese project of the new maritime silk route (…) A port like the one at Sines may have an important role to play, and China also wants to establish a major international connection in the energy sector and, following the agreement between Portugal and Morocco, we have an area that might be interesting,” he said. (macauhub)