Dutch government expects loss on ABN Amro sale

Updated: Friday, 23 Aug 2013 15:03

The Dutch government plans to sell lender ABN Amro in an initial public offering a year from now at the earliest but is unlikely to recoup its costs.

It put the value of the state-owned bank at about €15 billion - above some analysts' estimates and well below the total that the Netherlands poured into the bank's 2008 rescue and later additional support.

"We will get as good a price as possible," Prime Minister Mark Rutte told a press conference.

"The chance of selling with a profit is small. We will decide in a year if it is time and in the meantime we will ask ABN Amro to get ready for a listing."

By comparison, Britain is expected to make a profit when it sells part of its 39% stake in Lloyds Banking Group, possibly next month.

However, its sale of Royal Bank of Scotland, whose disastrous €70 billion-plus acquisition of ABN in 2007 cost both British and Dutch governments dearly, looks a long way off.

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"The (finance) minister's plans are the first step towards entering the private market. If parliament agrees, the first opportunity for an IPO would be the first half of 2015," Gerrit Zalm, the ABN Amro chief executive, said in a statement.

The Dutch government paid out nearly €40 billion to rescue the domestic financial sector in 2008, when it provided capital injections for banking and insurance group ING, insurer Aegon and financial group SNS Reaal, as well as nationalising ABN Amro.

Five years later the Dutch global banks are shadows of their former selves after numerous divestments and thousands of job cuts have left them largely focused on their domestic market and European backyard.

The rescue of ABN Amro and its related entities cost €16.8 billion initially, with subsequent support lifting the cost to €27.9 billion, the finance ministry said.

The government had to provide further support to the banking sector in February, delivering a €10 billion package to prevent SNS Reaal from collapsing under property loan losses.

Keijser Capital analyst Nico van Geest puts ABN Amro's current value at about €11-12 billion.

The eventual sale of ABN Amro, the third-largest bank, and SNS Reaal, No. 4, would be a welcome contribution to state finances at a time when the Netherlands is struggling to meet the European Union's deficit target of 3% of economic output.

ABN Amro today reported second-quarter net profit down 3% to €402 million from the first three months as impairment charges on loans and other receivables increased by €292 million, reflecting the effects of the recession and underlining the challenge the government faces as it prepares for the bank's listing.

However, net interest income rose 4% to €1.36 billion thanks to higher margins on loans, both for retail and commercial banking, while net fee and commission income was steady at €417 million.

While the economies of Germany and France grew faster than expected in the second quarter, pulling the euro zone out of recession, the Dutch economy has been hit hard by plunging house prices and a decline in consumer spending, leaving it mired in recession.

The government's economic forecaster, CPB, said the economy is now expected to shrink 1.25% this year, compared with a previous forecast of a 1% contraction. Growth is seen at 0.75% in 2014, against June's 1% forecast.

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