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Portugal’s Novo Banco to cut 1,000 staff in 2016

Portugal’s Novo Banco to cut 1,000 staff in 2016

LISBON: Portuguese state-rescued lender Novo Banco is planning to cut 1,000 jobs to help to reduce operating costs by 150 million euros ($163 million) as part of its restructuring plan agreed with Brussels, an internal memo showed.

The move is part of efforts by Novo Banco, the so-called good bank that emerged from the 4.9 billion euro rescue of Banco Espirito Santo in 2014, to return to profit and facilitate its sale as the government looks to recoup the 3.9 billion euros it lent to the rescue fund.

Novo Banco posted a loss of 981 million euros in 2015, hit by provisions for risky assets, but it is targeting a return to profit in 2018 after a restructuring plan instigated after a failed attempt to sell the bank last year.

The internal memo seen by Reuters said that the restructuring plan was approved by the rescue fund and the Novo Banco board. “It revolves around a series of measures, with a focus on the reduction of 1,000 staff in 2016 and a cut in total operating costs of 150 million euros,” the memo said.

The proposed job cuts equate to 14 percent of the bank’s workforce. After the first attempted sale of Novo Banco last year, when bids were deemed too low, the sale process was relaunched in January.

Novo Banco’s capital ratios improved last year after the central bank adopted a controversial measure in December to transfer nearly 2 billion euros in bonds from the bank back to “bad bank” Banco Espirito Santo with the intention of plugging a 1.4 billion euro capital shortfall identified by a European Central Bank stress test.