French banking group BPCE has reached an agreement to acquire Novo Banco, a Portuguese lender currently owned by US private equity firm Lone Star, for approximately €6.4 billion. This acquisition is significant as it represents a major cross-border transaction in Europe, expected to finalize in the first half of 2026.

Novo Banco, led by former AIB CFO Mark Bourke, views this sale as a strategic opportunity to align with one of Europe’s strongest financial groups. Bourke transitioned from CFO to CEO in 2022 after serving at AIB from 2014 to 2019, where he played a key role in the bank's IPO.

Lone Star holds a 75% stake in Novo Banco, while the Portuguese government retains a 25% interest through various entities, including the Resolution Fund. The acquisition by BPCE, which includes units like Banque Populaire and Natixis, is poised to enhance cross-border banking consolidation in Europe, despite recent governmental resistance to such deals in countries like Spain and Italy.

The Novo Banco acquisition adds to the $27 billion in banking industry acquisitions announced this year, according to Bloomberg data. BPCE emerged as the leading bidder, surpassing Spain’s CaixaBank, which had also shown interest in acquiring Novo Banco. Lone Star had previously considered an initial public offering for Novo Banco shares.

Concerns have been raised by Portuguese Finance Minister Joaquim Miranda Sarmento regarding the increasing presence of Spanish banks in Portugal, which currently hold about a third of the country's banking market. He emphasized the need to limit this concentration to avoid dependency issues, especially with CaixaBank already owning Banco BPI, Portugal's fifth-largest bank.

Novo Banco ranks as Portugal's fourth-largest lender, with a portfolio that includes €17 billion in corporate loans, €10 billion in mortgage loans, and €2 billion in personal loans, serving around 1.7 million clients. The bank returned to profitability in 2021, benefiting from rising net interest income as central banks increased interest rates. Previously, Novo Banco had to divest assets and address a high non-performing loan ratio following its establishment from the collapse of Banco Espirito Santo.

Banco Espirito Santo, once the largest lender in Portugal, required a €5 billion bailout in 2014 due to significant losses linked to its family-controlled group. The Portuguese central bank subsequently transferred its deposits and most assets to Novo Banco, which Lone Star supported with a €1 billion investment when it acquired its stake in 2017.

This acquisition marks a pivotal moment for Novo Banco and the broader European banking landscape, as it navigates regulatory challenges and seeks to strengthen its position within the market.