December 17, 2014 / 3:28 PM / in 4 years

UK investor bets on Portugal recovery, buys consumer loan net

LISBON (Reuters) - British private equity investment firm Cabot Square Capital bought Portuguese consumer credit provider BPN Credito hoping to increase its loan book significantly as it bets on the country’s economic recovery after a long slump.

“We see an opportunity for growth because the Portuguese economy is coming out of a recession, with unemployment falling, and that has a strong impact on consumer credit performance,” investment director Tarun Sharma told Reuters on Wednesday.

Although relatively small at 36 million euros (29 million pounds), the acquisition is a welcome sign of confidence from western European investors in the country’s consumer financing market, especially after the collapse and state rescue of Banco Espirito Santo in August, which briefly spooked investors.

Sharma said his firm had been studying the acquisition, which came through a privatisation, since 2012 and the collapse of the bank did not affect the plan.

“We were doing due diligence and still feeling pretty confident even when that crisis unfolded in July. I think Portugal is on a good footing now. We get anecdotal evidence of an increase in interest by foreign investors,” Sharma said.

The acquisition follows a recent wave of privatisations in sectors like energy and insurance in Portugal, mostly dominated by Chinese companies eager to gain a foothold in Europe.

BPN Credito was part of BPN bank nationalised by the government in 2008. The bank itself has since been sold to Angola’s Banco BIC for 40 million euros. BPN Credito specialises in auto finance, primarily for used cars, and provides equipment and real estate leasing services.

“We see new auto sales increasing as much as 30 percent here, coming from a very low base. Also, companies postponed decisions to renew their auto fleets during the recession, which means there is a large stock of used cars,” Sharma said.

Cabot Square Capital expects to “significantly” increase BPN Credito’s loan book, which now stands at over 200 million euros, within a short period under a new brand, and is assessing the possibility of the business acquiring further assets like existing consumer loan portfolios, he added.

Editing by Jeremy Gaunt

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