Business & finance

ABN Amro continues move towards privatisation

The Dutch bank, which was nationalised in the wake of the financial crisis, is now 44% privately owned, with insurer ASR Nederland now privatised entirely.

ABN Amro, the biggest domestic lender in the Netherlands, has taken another step towards full privatisation following a sell down by the Dutch state. Priced at US$1.8bn, the accelerated book build (ABB) sell down took place in September amid a steady appetite for European bank stocks. The government’s holding now stands at 56%.

Once a global banking giant, ABN Amro almost collapsed during the 2008 financial crisis, and was bailed out by the Dutch state to the tune of around €22bn. Since then, it has slimmed down markedly and refocused its business on domestic lending. Around two thirds of its loans currently relate to Dutch real estate.

The government’s shares are managed by NL Financial Investments (NFLI), the state shareholding agency, which was set up in 2011. Since 2013, the agency has been looking to put the bank back on the market; however, it was ultimately decided that this privatisation should happen only in tranches.

The initial public offering took place in November 2015, when 23% of the total shares were sold. The biggest IPO of a European bank since the financial crisis, it raised €3.8bn for the Dutch government. A further 7% of the shares were divested in November 2016, raising €1.33bn, and an additional 7% in June 2017 raised €1.48bn. The latest sell-down, which raised €1.53bn, saw shares fetch €23.50 each, their highest rate yet.

As Jeroen van Maarschalkerweerd, a spokesperson for ABN Amro, told EMEA Finance, the most recent transaction will have no effect on the bank’s overall strategy, which was formulated at the time of the IPO and updated in 2016. The bank is pursuing gradual growth, in line with its moderate risk profile. It is also gearing up for further privatisation, NLFI having announced that it will divest its remaining stake over time.

On top of that, Chief Executive Officer Kees van Dijkhuizen has introduced a raft of cost cutting measures in a bid to counter low interest rates. These have included reductions in IT spending, as well as simplified head office functions and hundreds of job losses. In the last year, the bank has reduced its workforce by 8% and shut down 10% of branches.

“In 2016 we announced we want to realise the same cost level in 2020 compared to 2015, therefore we have targeted €900m in costs savings,” says van Maarschalkerweerd. “We have also simplified our organisation and changed the way we work, and looking at staff levels you see a clear declining trend. We are showing good progress on our cost reduction programmes.”

In its third quarter results, announced in November 2017, profits were up 11% year on year, with the sharp drop in costs helping to offset the 4% fall in revenues. This comes at a time of optimism about growth in the euro region.

“The Dutch economy is performing well, and we are well positioned to benefit from this strong performance,” says van Maarschalkerweerd. “We see client lending picking up, both in mortgages and in corporate and consumer loans.”

In August, the government think tank CPB revised its growth forecasts for the Dutch economy up to 3.3% in 2017, marking the first time in a decade that growth has surpassed 3%. Prime minister Mark Rutte said the Netherlands had put the economic crisis behind it, adding that the country had the fastest growing economy in the Western world.

Another Dutch company to be re-privatised recently is the insurance group ASR Nederland. One of the largest insurers in the Netherlands, the group was nationalised in 2008 when parent company Fortis needed rescuing. As with ABN Amro, the shares were owned by NLFI, before being sold off in stages.

In September, NLFI announced that it had divested its final 30.15 million shares for €33.75 each, yielding €1.02bn. ASR Nederland itself said it would buy back 3 million shares, or 2% of the total issued share capital. (NLFI and ASR Nederland declined to speak to EMEA Finance about this transaction.)

Despite the overall mood of positivity, Dutch banks are awaiting the Basel IV regulations with some trepidation. The regulations, expected to be finalised by the start of 2018, could have a heavy impact on capital ratios, with the Netherlands among the countries worst affected.

Along with Nordic banks, Dutch banks traditionally have large mortgage loan books, which are set to be subject to a higher risk rating under Basel IV. According to a report by McKinsey & Co, European banks may have to plug a capital shortfall of around €120bn, “and will likely have to take some unconventional measures to comply”.

ABN Amro has said its capital ratio could fall by 5-6 percentage points, with van Dijkhuizen describing the changes as “completely unwarranted”. He plans to lobby the European Commission once the rules are finalised. The bank’s share prices dropped around 2% in light of these concerns. However, the overall trajectory is upward, with share prices having increased by around 40% since the bank’s IPO in 2015.

This article appears in EMEA Finance

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