LISBON, Feb 13 (Reuters) - Portugal's Novo Banco has

begun preparations for an initial public offering (IPO) that

could be one of the largest this year, and taps into an upsurge

in enthusiasm for listings as indexes hover near multi-year

highs.

In a statement on Thursday, the bank, Portugal's fourth

largest, said it had received instructions from U.S. private

equity fund Lone Star, its biggest shareholder.

"Novo Banco will work in coordination with its shareholders

on the implementation of the IPO over the coming months," it

said.

Novo Banco was created in 2014 from the collapsed BES after

a state bailout, and in 2017, Lone Star bought a 75% stake. The

rest is held by the resolution fund, financed by Portugal's

banks, and the Portuguese state, which has 11.46%.

Lone Star had been considering an IPO or a full sale,

sources with knowledge of the matter told Reuters in September,

estimating that the bank could be worth about 5 billion euros

($5.20 billion).

A full sale, potentially to another Portuguese bank, now

appears unlikely. Novo Banco CEO Mark Bourke has long advocated

an IPO, which would keep the lender independent.

Novo Banco did not say what percentage of capital Lone Star

wanted to float, or on which stock exchange the shares would be

listed.

Finance Minister Joaquim Miranda Sarmento said two weeks ago

that Novo Banco and Lone Star had told the government the IPO

would be for 25%-30% of the bank's capital.

As buoyant equities markets have inspired several companies

in the region to decide on listings, travel tech company HBX

Group raised 860 million euros in an IPO and debuted on

the Spanish stock market on Thursday. HBX shares, however, fell

heavily on their first day.

($1 = 0.9593 euros)