UPDATE 4-Dutch government sets ABN AMRO share sale plans in motion

Fri Aug 23, 2013 10:19am EDT

Related Topics

* Government values bank at 15 bln euros

* Analyst values it at 11-12 bln eros

* Bank told to prepare for IPO

* Sees IPO in first half of 2015 at earliest

By Anthony Deutsch

THE HAGUE, Aug 23 (Reuters) - The Dutch government plans to sell lender ABN AMRO in an initial public offering (IPO) 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 euros ($20 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 on Friday. "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 percent stake in Lloyds Banking Group , possibly next month. However, its sale of Royal Bank of Scotland, whose disastrous 70 billion-plus euro acquisition of ABN in 2007 cost both British and Dutch governments dearly, looks a long way off.

"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 euros 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.

MUCH-NEEDED FUNDS

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

The government had to provide further support to the banking sector in February, delivering a 10 billion euro 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 to 12 billion euros.

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 percent of economic output.

ABN AMRO on Friday reported second-quarter net profit down 3 percent to 402 million euros ($536.5 million) from the first three months as impairment charges on loans and other receivables increased by 292 million euros, 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 percent to 1.36 billion euros thanks to higher margins on loans, both for retail and commercial banking, while net fee and commission income was steady at 417 million euros.

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 percent this year, compared with a previous forecast of a 1 percent contraction. Growth is seen at 0.75 percent in 2014, against June's 1 percent forecast.

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