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Dutch gov't to reprivatize ABN Amro via listing

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TOBY STERLING | August 23, 2013 10:06 AM EST | AP

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AMSTERDAM — The Dutch government plans to re-privatize ABN Amro NV, the bank that was nationalized five years ago to help prevent a meltdown of the financial system, via a stock market listing that will happen next year at the earliest, Prime Minister Mark Rutte said Friday.

"Our conclusion is that this bank can return to the market," Rutte told reporters, adding that ABN would need at least a year to prepare for a public listing and that government officials have asked the company to start getting ready.

ABN was nationalized in October 2008 together with the Dutch operations of one of its would-be acquirers, Belgium's Fortis NV – now defunct – in a takeover bid that went horribly wrong. Finance Minister Jeroen Dijsselbloem said Friday the government had "invested" around 22 billion euros in saving ABN Amro.

The bank is now worth only about 15 billion euros following an aggressive restructuring under state stewardship that saw it cut jobs and sell off foreign units to refocus on the domestic economy, Dijsselbloem said .

Earnings have suffered along with the weak Dutch economy. Second quarter profit rose to 402 million euros ($537 million) from 337 million euros in the same period of 2012, ABN reported earlier Friday, but that was only because of fewer one-off impairment charges in the most recent quarter.

Bank CEO Gerrit Zalm, appointed by Dutch government officials, warned that bad loans are rising amid the Dutch recession, which has now passed the one-year mark. He said small businesses are suffering the most.

"A growing number of businesses that managed to weather the decline in revenues for a number of years are now reaching the end of their reserves," Zalm said. "We expect loan impairments for 2013 to rise above last year's level as the economic conditions in the Netherlands are set to remain challenging for the remainder of 2013."

Mortgage defaults are also rising, he said, though steep declines in real estate prices are tapering off.

One negative for businesses is a positive for ABN: Dutch consumers are saving more and spending less. The influx of retail savings provides a cheap source of funding for ABN, which then lends the money on at a higher rate. That helped net interest income rise to 1.36 billion euros from 1.28 billion euros in the same period a year ago.

Despite the recession, the Dutch government is set to announce a new round of austerity measures next month in an attempt to bring its budget deficit below the 3 percent maximum mandated by European rules.

The Dutch government has been one of the strongest backers, along with Germany, of enforcement of those rules and of austerity policies for Southern European nations. However, similar measures have proved unpopular at home, and the government's own independent Bureau for Economic Analysis says that more spending cuts will likely do more harm than good.

Rutte said an additional condition of selling ABN Amro is that financial markets will have to be stable.

It is not clear whether Prime Minister Mark Rutte's Cabinet will be able to pass an austerity budget, as his centrist coalition lacks a majority in the upper house of parliament. However, Rutte said Friday he was confident the budget, which has yet to be revealed, would eventually succeed – after the Cabinet makes some concessions to the opposition.

Finance Minister Jeroen Dijsselbloem endured a torrent of criticism Thursday after a newspaper report suggested he agreed with German counterpart Wolfgang Schaeuble that Greece will likely need a new bailout next year.

Opposition parties pounced on the remarks to question why the Netherlands has extra money to fund a Greek bailout while Dutch taxpayers are being asked to make new sacrifices at home.

But the government ignored calls for a debate on the matter and Dijsselbloem later clarified he hadn't promised Greece will be bailed out again.

Proceeds from privatizing ABN Amro will not count toward the Netherlands' structural budget deficit or surplus. But they will make some impact on national debt, estimated at 74.5 percent of GDP in 2013.