* ABN Amro to relist as safe, local bank
* Low-risk, dividend yield appeal to investors
* But Dutch economy, loan losses weigh on IPO prospects
* Listing likely to go ahead mid 2015 at the earliest
By Laura Noonan
AMSTERDAM, March 21 As reconstructed Dutch bank
ABN Amro prepares to go back to the stock market, the bailed-out
lender's modest new profile appears to be chiming with
crisis-hit, risk-averse investors.
ABN Amro was bought for $100 billion by Royal Bank of
Scotland, Fortis and Santander seven years ago but then had to
be taken over by the Dutch government during the financial
crisis. Now it is valued at just 15 billion euros ($21 billion)
and its scaled-back business depends on the Netherlands for 80
percent of its earnings.
Changing the marketing line from "international financial
giant" to "Dutch retail bank" was tough initially for chief
financial officer Kees van Dijkhuizen. But the response from
potential shareholders has been telling: while around 25 people
dialled in to the bank's first investor call in summer 2011, the
last call in February had about 100 participants.
"I understood that it was actually an advantage," said van
Dijkhuizen in an interview in his 21st floor office in ABN's
headquarters, which dominate the skyline of Amsterdam's
Van Dijkhuizen is preparing to return ABN to the stock
market from next year. The bank has spent the best part of three
years educating would-be shareholders about the bank's
conversion to a "steady as she goes" philosophy that values
lower risks over higher returns.
With many of the world's major banks still stuck paying for
the sins of the past, that's an attractive proposition for
investors with an eye on a stable dividend.
"What you get is a low-risk bank serving the communities of
the Netherlands, well capitalized, not planning to do anything
too exotic," said Christopher Wheeler, analyst at Mediobanca.
"People want stable yields."
LOW MARGINS, SAFE DIVIDEND
The picture is not entirely rosy however. The new ABN Amro
is operating in a weak Dutch economy, which was stripped of its
AAA rating by Standard & Poors in November and is expected to
grow by less than the EU average in 2014 and 2015.
Provisions for loan losses dragged down earnings for both
ABN and peer ING in 2013 - ABN earned 1.2 billion euros
in profit last year compared to almost 10 billion in 2007 - and
prospects for loan growth look slim.
"The main downside risk is housing," said Alexandre Birry of
ratings agency S&P, which downgraded the ratings of the Dutch
banks it covers in December after stripping the sovereign of its
AAA rating weeks earlier.
Nonetheless, in spite of the weak growth and low margins,
ABN still managed to pay the government a 350 million euro
dividend last year, representing around 30 percent of earnings,
and is targeting a payout ratio of 40 percent by 2015.
"If management can sell the IPO as a solid dividend (yield)
story the IPO should be doable," said Patrick Lemmens, a
Rotterdam-based fund manager for Robeco. "Of course it's also
very important what the size would be of the initial listing. It
should be large enough (to guarantee liquidity) and not be too
large (for the market to absorb)."
Lemmens suggested 3 to 5 billion euros as a potential first
One investment banker who asked not to be named said he
believed the flotation would be successful despite the current
"It's one of the clear winners in the market," he said. "The
Netherlands is a solid economy and this is a company with a
solid position...But it doesn't have the sex appeal of an
emerging economy bank".
The Dutch state, which pumped 21.66 billion euros into ABN's
2008 bailout, has signalled the first batch of the bank's shares
could go to private investors as soon as 2015.
In preparation, Dies Donker, ABN's head of investor
relations, and her team, have been visiting Europe's top 30 bank
investors in Frankfurt, London and Paris since 2011. Their
efforts have been complemented by the bank's IPO office, created
in late 2013 and stewarded by Fred Bos, a 23-year veteran of the
group who came to ABN when it was merged with the Dutch
operations of Belgian bank Fortis.
Relations between the NLFI, which manages the government's
stake, and the bank's management have been good but to avoid any
potential future confusion, negotiations are underway to map out
who will decide what when it comes to the IPO.
Bos said ABN would be consulted on key issues like how much
of the bank to sell and pricing.
Ahead of the IPO, non-core assets have been sold, while
peripheral business, including an international diamonds and
jewellery office in Botswana, have been closed.
"We want to be a clear, transparent bank without a lot of
legacy issues," said Bos.
ABN needs to send a strong message - starting from next
year, Europe's stock markets will be busy with bank listings.
Up to eight British banks could list on the London Stock
Exchange in the next two to three years. TSB and Williams &
Glynn are being sold off by Lloyds Banking Group and
Royal Bank of Scotland respectively as a condition of
their government bailouts during the 2008/9 financial crisis.
Santander has been considering a flotation of its
UK arm for several years, while National Australia Bank could
also spin off its UK business. Others planning IPOs include
Virgin Money, Metro Bank, Aldermore and Shawbrook, which are
among a growing band of new British banks looking to break the
dominance of the country's biggest lenders by taking advantage
of government measures to stimulate competition.
Mid 2015 is the earliest practical time for ABN's IPO - the
bank wants to wait for the results in late 2014 of an EU-wide
sector health check to decide when to begin the process of
hiring advisors and drawing up a prospectus.
Van Dijkhuizen would not be drawn on when the bank would
relist but said it would take stock in the third quarter of 2014
and give its recommendation to the finance minister.
He did say that investment banks were circling, but so far
none has snared what will be one of the biggest IPO mandates in
"A lot of people are interested in us at the moment," said
van Dijkhuizen. "We love to talk with them - we get a lot of
($1 = 0.7188 Euros)
(Additional reporting by Freya Berry and Matt Scuffham in
London and Carmel Crimmins in Dublin; Editing by Sophie Walker)