* Nationalisation to cost an initial 3.7 bln euros
* Seen pushing budget deficit further above target
* SNS Reaal hit by soured property assets, management quits
* Shareholder group says may challenge nationalisation
(Adds prime minister's comment, rating agencies)
By Thomas Escritt and Anthony Deutsch
THE HAGUE/AMSTERDAM, Feb 1 The Netherlands has
nationalised bank and insurance group SNS Reaal in a $14
billion rescue that highlights the fragility of European banks
and the continued exposure of taxpayers five years after the
financial crisis erupted.
The Dutch government said on Friday it had put together the
10-billion-euro package - which follows a much smaller bailout
in 2008 - to prevent SNS Reaal's collapse under the weight of
property loan losses and to shore up confidence in the financial
system after a private investor-led rescue failed.
The move shows how, despite billions of euros of bailouts
and regulators' attempts to clean up the industry, some European
banks are struggling to recover from the financial crisis in a
persistently weak economy, and how the region's debt-laden
governments - and in turn taxpayers - remain on the hook.
That is likely to prompt an outcry from a Dutch public which
has already suffered years of austerity, including a cumulative
30 billion euros of budget cuts announced in the past year.
"The bankers get more and more money, and the people at the
bottom foot the bill," said Jan-Erik Lubbers, a pensioner, as he
sheltered from the rain under a shop awning in The Hague.
The rescue will lead to a worsening in the Dutch budget
deficit in 2013, already forecast to exceed European Union
targets. That will be a challenge for Prime Minister Mark Rutte,
who was re-elected in September, and embarrassing for his new
finance minister, Jeroen Dijsselbloem, who only last month took
over as head of the Eurogroup of euro zone countries, which are
trying to put a sovereign debt crisis behind them.
"Without a doubt this is a serious setback for the state
budget," Rutte said in his weekly televised press briefing.
"This is obviously going to come out of the pockets of
taxpayers. We would all have preferred to spend it on other
Several other European banks are also struggling to free
themselves from underperforming assets. French bank Credit
Agricole announced over $5 billion of charges on
Friday, a day after Deutsche Bank also unveiled big
The Dutch government paid out nearly 40 billion euros to
rescue the domestic financial sector in 2008 when it provided
capital injections for ING, Aegon and SNS
Reaal, as well as nationalising ABN AMRO.
They have either repaid state funds or are getting back on
their feet. SNS Reaal "seemed to be the most vulnerable" because
of its big property exposure, said Jan Maarten Slagter, a
director of the Dutch Association of Shareholders (VEB).
"A big part of the Dutch bank industry is already in state
hands," he said when asked whether he expected any other Dutch
banks to require aid: "This should be it."
Despite its previous bailout, SNS Reaal, the fourth-biggest
financial group in the Netherlands, has struggled to turn around
its property finance arm. Over years it expanded aggressively
into all areas of property financing, from Spanish golf resorts
to Dutch commercial and residential projects, and U.S. real
estate. With the downturn in property prices came big losses.
SNS Reaal, with 2.6 million account holders and 36.4 billion
euros of deposits, has tried to sell assets and raise funds for
months, but was unable to meet a Jan. 31 deadline to come up
with a rescue, Dijsselbloem told a press conference.
Its collapse "would have unacceptably large and undesirable
consequences for financial stability, the Dutch economy and the
Dutch tax payer," he said in a letter to parliament.
The Netherlands used a new law known as the intervention act
to expropriate SNS Reaal's shares, subordinated debt and some
hybrid securities, but not senior debt and covered bonds.
BNP Paribas' investment funds ranked among the top
owners of the shares. The fund manager was not immediately
available for comment.
The Dutch Association of Shareholders is considering whether
to challenge the nationalisation, Slagter said.
"This wasn't really a liquidity crisis, there was no bank
run ... it was all about the revaluation of the property which
we already knew was a problem."
He said the association also wanted an investigation
launched into possible mismanagement at the group.
Last month, SNS Reaal said former clients of its property
finance arm were being investigated by the country's tax and
financial crimes agency, but gave no details.
"I don't think there will be an extra investigation,"
Dijsselbloem told Reuters later on Friday, adding it was already
clear what the problems were.
SHARING THE BURDEN
Dijsselbloem put the initial cost of nationalisation at 3.7
billion euros, saying SNS Reaal will receive a capital injection
of 2.2 billion euros, and a further 1.5 billion euros to write
down state aid and property assets. The state is providing 1.1
billion euros in loans, and 5 billion euros in guarantees.
However, in an effort to share the burden with the private
sector, Dijsselbloem said Dutch banks will have to contribute 1
billion euros to the rescue in 2014.
"I can understand the reluctance that many will feel again
because a large amount of public money is required. Therefore I
want the private sector to contribute as much as possible to
help pay for the rescue of SNS Reaal," he said.
The cost was to be roughly split between the country's three
largest financial groups, ING, ABN Amro and Rabobank.
The Dutch budget deficit is forecast to reach 3.3 percent of
gross domestic output in 2013, above the 3 percent limit set by
the European Commission, according to government agency CPB
which is due to publish revised forecasts in the next few weeks.
The finance minister said the 3.7-billion-euro of initial
aid would lead to a further deterioration in the deficit of 0.6
percentage points, but declined to say whether this would
necessitate further austerity measures.
Rutte's new coalition government was forced to come up with
about 16 billion euros of budget cuts soon after the election
last September and quickly fell in the opinion polls.
Richard McGuire, strategist at Rabobank, said he did not
expect the rescue of SNS Reaal and resulting impact on the
deficit to hurt the Netherlands' triple-A credit rating because
the government had raised much more than expected in its auction
of fourth generation (4G) wireless frequencies last year.
But ratings agencies said they were already looking at the
implications for the Netherlands.
SNS Reaal, which received 750 million euros of state aid in
2008, said its top executives - chairman Rob Zwartendijk, chief
executive Ronald Latenstein and finance chief Ference Lamp - had
resigned, as they had wanted to find a private sector solution.
Gerard van Olphen, an executive from insurance group Achmea,
was appointed chief executive, and Maurice Oostendorp, a former
executive from ABN Amro, stepped in as chief financial officer.
The Dutch property market is one of the worst performing in
Europe, having fallen by more than 16 percent since 2008. Prices
are expected to continue declining this year, wiping as much as
a quarter off prices since the peak.
SNS Reaal's property finance unit had total real estate
exposure of nearly 14 billion euros at the end of 2009,
according to its annual report. By June 2012, the book value of
the property portfolio stood at 8.55 billion euros, the finance
ministry said, with roughly 77 percent in the Netherlands.
($1 = 0.7367 euros)
(Writing by Sara Webb; Editing by Hans-Juergen Peters, Mark
Potter and Sophie Walker)