November 20, 2015 / 1:31 PM / 3 years ago

ABN Amro shares rise as bank refloats seven years after costly bailout

AMSTERDAM (Reuters) - ABN Amro ABN_w.AS returned to the Amsterdam stock exchange on Friday with a valuation of 16.7 billion euros ($17.9 billion), marking an important stage in its rehabilitation since its near collapse and nationalization in the financial crisis of 2008.

Certificates in the bank’s initial public offering (IPO) rose 3.4 percent to 18.35 euros in early trade after being priced at 17.75 euros each, seven years after a multi-billion euros state bailout at the height of the crisis.

In the largest European bank listing since the crash, the Dutch state sold a 20 percent of the lender, raising 3.3 billion euros. It may sell an additional 3 percent in an over-allotment option depending on demand, and intends to sell the rest in tranches in coming years.

“The stock market listing is an important milestone,” said CEO Gerrit Zalm, after sounding a gong at the start of trade in Amsterdam.

“If you look at our capital position, it’s strong, we have a good return on assets, we’ve been paying a dividend again since 2012 and of course we’re going to continue with that ... We’re back again.”

The privatization echoes other state selloffs of rescued banks, with Britain for instance having progressively disposed of holdings in Lloyds Banking Group (LLOY.L) and starting to sell RBS (RBS.L) shares.

The underlying ABN shares are held by an independent foundation with the power to resist an unwanted takeover, as the Dutch government is determined to prevent a repeat of the mistakes that led to its nationalization.

STATE RESCUE

ABN was carved up 2007 after a 71 billion euro ($76 bln) hostile acquisition by RBS, Santander (SAN.MC) and Fortis, nominally the largest ever takeover in the banking industry and which helped lead to the failure of RBS and Fortis.

The Dutch state had to intervene in 2008 to rescue the Dutch operations of both ABN and Fortis to avoid a crippling bankruptcy. The affair cost taxpayers around 24 billion euros. Finance Minister Jeroen Dijsselbloem has acknowledged that ABN’s listing will only recoup part of that.

Operations of ABN and Fortis operations were combined and restructured under Zalm, who has promoted the new ABN as a conservative investment with limited growth potential but healthy returns.

Over the past year it has made around 1.9 billion euros in underlying profit, and at the flotation price its dividend yield for 2015 should be more than 5 percent.

ABN now makes 80 percent of its profit in the Netherlands, where it competes with ING ING.AS and Rabobank [RABO.UL].

The bank on Nov. 9 reported third-quarter earnings of 509 million euros, up 13 percent from a year earlier, as bad loans fell.

“This is currently a very cheap stock,” said Saxo Bank’s head of equity strategy Peter Garnry, noting the bank’s return on equity of around 13.7 percent and its relatively high core Tier 1 capital ratio of just under 15 percent.

($1 = 0.9350 euros)

Editing by Muralikumar Anantharaman and David Holmes

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