Chinese Financial Firms Aggressively Acquire Assets in Europe
According to an ft.com report, a couple of Chinese firms are busy acquiring assets all over Europe, taking advantage of its financial services sector, which is currently in deep trouble.
Ft.com reports that this is happening mostly in Portugal, a country where China is the largest source of FDI. The two companies, Anbang Insurance and Fosun International, are scheduled to submit bids for the acquisition of Portugal’s third largest bank Novo Banco soon.
The acquisition of Novo Banco for over €4 billion represents over 2% of Portugal’s GDP and makes it one of the hubs for Chinese investment in 2015.
Ever since the EU countries plunged into debt crisis in 2011, Chinese finance companies have invested around €6 billion in Portugal. In 2014, Fosun acquired 80% of a major Portuguese insurance company called Fidelidade for €1.7 billion. Then Fidelidade purchased a major private hospital operator in Portugal called ES Saude along with a 5% share of a Portuguese grid operator called Redes Energeticas Nacionais.
Anbang and Fosun’s rivals in the acquisition of Novo Banco are Santander of Spain and Cerberus and Apollo Global Management, two private equity groups from the US.
Novo Banco was previously Espirito Santo, which turned out to be an utter failure although it was among the biggest lenders in Portugal. The bank was relieved of toxic assets worth €7 billion and inherited a loan portfolio of €40 billion, 70% of which comprised corporate lending. In December, it reported deposits of €26.6 billion. The Chinese companies are especially attracted by the fact that the bank holds a 9.7% share in Angola’s Banco Economico.
The Portuguese government had tried to save the bank by infusing fresh capital of €4.9 billion into it. Some of the financial experts in Portugal are of the opinion that the bank should be sold to any company that bids the highest so that the €4.9 billion can be retrieved.
Some argue that consolidation can save the banking system in Portugal, and in order to achieve consolidation, Novo Banco should be sold to Santander Totta, its local subsidiary although this could result in political opposition.
A banker from Lisbon is of the opinion that Novo Banco should attempt to save its assets from lawsuits by requesting protection clauses. On May 27, Central Bank Governor Carlos Costa said at a parliamentary committee meeting that the European Commission is getting all the information regarding the acquisition of Novo Banco.
