Lone Star is approaching an exit from Novo Banco, with France’s BPCE and Spain’s CaixaBank shortlisted as final bidders for the Portuguese lender, according to sources cited by Bloomberg.

The private equity firm, which holds a 75% stake in Novo Banco, is weighing a strategic sale against a potential IPO. A decision could be made as early as this week. The process is being overseen by Deutsche Bank, while a public listing remains a viable alternative.

Novo Banco’s valuation is estimated between €5.5bn and €7bn by analysts at JB Capital. Should the IPO proceed, it could raise over €1bn, making it Portugal’s largest flotation in nearly 20 years. The government, which owns the remaining 25% stake through its Resolution Fund, has indicated it may sell up to 30% of the bank. Bank of America, JPMorgan, and Deutsche Bank have been appointed as joint global coordinators for the potential offering.

Lone Star acquired Novo Banco in 2017 through a post-crisis restructuring process. Since then, the lender has executed an extensive turnaround strategy, returning to profitability in 2021 and benefiting from rising interest rates that have bolstered its net interest income.

The exit would mark a significant liquidity event for Lone Star, highlighting private equity’s role in stabilising and repositioning European financial institutions post-crisis.