Novobanco bonds appreciate with sale to BPCE Group, says XTB

Groupe BPCE, the second largest banking group in France, recently announced the acquisition of Novobanco for 6.4 billion euros, which is causing strong repercussions in the debt market, argue analysts at brokerage XTB.

Novobanco is not listed on the stock exchange, and for this reason XTB resorted to analyzing the behavior of the bond market to assess the impact of this announcement.

According to XTB, the Portuguese institution's subordinated and senior bonds appreciated immediately, reflecting a perception of lower credit risk and greater investor confidence in the stability of the business.

One of the most visible reactions to the announcement of the purchase was the reduction in the spread of the subordinated Tier 2 (T2) bonds issued by Novobanco. “The issue with a coupon of 9.875% and a value of 500 million euros stands out, whose spread compared to the equivalent bonds of BPCE fell by 15 basis points (bps), settling at around 52 bps”, says XTB.

“This movement was driven by two factors, a 10 bps tightening in Novobanco spreads, and a 5 bps widening in BPCE bonds”, explain the analysts.

The trend points to full convergence as the completion of the acquisition transaction approaches.

Moody's recently upgraded Novobanco's T2 bonds to Baa3, giving them investment grade status and potentially opening up access to more comprehensive debt indices. Additionally, integration into BPCE, which has higher ratings (Baa2, BBB, BBB+), could prompt further positive revisions in the credit risk assessment.

XTB highlights that in recent years, Novobanco has undergone a profound restructuring. After a decade of adjustments, the bank now has a significantly more stable credit profile. Novobanco's first profit was recorded in 2021, with profitability maintained until 2024.

There was an evolution from losses of 1.3 billion in 2020 to profits of 745 million in 2024.

The CET1 ratio of 16% in the first quarter of 2025, exceeded the sector average (15.3%) and exceeded the minimum target of 13% by around 630 million euros.

“The MDA Buffer (CET1) of 5.9% exceeds the sector average of 4.1%”, according to XTB.

“The solid presence in the domestic market reinforces investor confidence”, adds the brokerage firm, which says that Novobanco holds a 14% share in corporate credit, 6% in personal credit, and 9% in deposits.

Positive outlook for the future

The sale of Novobanco to BPCE represents not only a change in shareholder control, but also a reinforcement of the institution's institutional and financial credibility.

“This strengthening is supported by the improvements received through the ratings, which reflect the consistent results achieved,” says XTB.

“It is expected that, by 2026, Novobanco will align its debt spreads with those of BPCE, benefiting both current debt holders and future investors in Portuguese assets with controlled risk and potential appreciation”, the brokerage firm also highlights.

For its part, “BPCE has demonstrated strong results and sustainable growth. The bank recorded a 10% increase in turnover year on year, EBT rose 7%, although the group's net result was lower than the previous year due to an additional tax paid to the Government”, he adds.

In terms of liquidity, all group metrics remain above minimum requirements, XTB highlights.

“Therefore, the integration of Novobanco appears to be an added value for the continued growth of the BPCE group”, concludes the brokerage.