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Thursday, 22 August 2013

Dutch Finance Minister Jeroen Dijsselbloem seemingly plans to sell the ABN Amro bank at the shortest possible notice. Well, he might be in for a rough ride, if he wants to return all tax-payers money!

ABN Amro is the ‘oldest’, Dutch state-owned bank. In 2008, the bank came in Dutch state hands, after the sale of ABN Amro to the troika of Royal Bank of Scotland, Banco Santander and Fortis Bank went totally awry in the fall of 2008 and ‘new owner’ Fortis came into nearly fatal liquidity problems. The same happened in a later stage to RBS, who also took a bigger bite than it could chew with ABN Amro.

Would Fortis Bank and Fortis Insurances not have been rescued by the Dutch and Belgian state, both ABN Amro (i.e. the Fortis part of this bank) and Fortis would certainly have defaulted.

In 2011, the nationalization and merging process of Fortis Bank and ABN Amro was well underway and the new ABN Amro bank was developing its key strategy. This strategy was: aiming for a strong position at the domestic market, while abolishing almost all former international ambitions, except for those lines of business wherein ABN Amro was a renowned competitor in the ‘champions league’ of banking (for instance: the derivative trade). At that time, it seemed a sensible, albeit not very ambitious strategy for a former (G)SIFI-bank, before the abbreviation G-SIFI even existed.

At the same time, however, CEO Gerrit Zalm (perhaps prompted by Finance Minister Jan Kees de Jager) expressed his opinion that ABN Amro should return to the Dutch / international stock exchanges in (about) 2014, in order to not let the bank reside in the state’s hands forever.  

In one of my early articles, I challenged this opinion by Gerrit Zalm and told him that the chance that the Dutch state would earn back 100% of the total state aid invested in Fortis / ABN Amro (approximately €30 billion) was very limited:

If you then state as ABN AMRO that you are planning to return to the stock exchange in 2014, in my opinion you are busy with a ´mission impossible / implausible´: 
  • The amount of state support that ABN AMRO received is estimated at about €25 bln, including the state support for rescuing Fortis Bank:
    • The chance that an IPO in 2014 will yield this amount of money for the state is about 0,00000000001%, especially if you read what the target customer groups of the bank are.
    • I don´t know if Jan Kees de Jager (finance minister) or PM Mark Rutte are ready to tell the Dutch taxpayers that they can wave goodbye to at least €15 bln in state support when the IPO is over and done?
    • Fact is that if the state remains a partial owner by majority of the bank, the other shareholders know they don´t stand a chance when the bank comes into trouble again. The state comes first. 

There isn’t one cell in my body that has a different opinion now; especially after ABN Amro has been prominently involved in the Vestia drama and still doesn’t know what is ‘bakin’ at the stove’ for the bank, when it comes to criminal / prudential punishments by the criminal court, the Authority Financial Markets or De Nederlandsche Bank (Dutch national bank).

Nevertheless, the Dutch finance minister Jeroen Dijsselbloem, who is now the ‘happy owner’ of two banks (ABN Amro and SNS bank) and three insurance companies (Reaal, Zwitserleven and ASR Insurances), is seemingly planning to sell ABN Amro at the shortest possible notice.

In the Dutch media, he expressed the desire to decide on the future of ABN Amro within one or two weeks. His preference goes to a full sale of ABN Amro, without continuing state possession of shares.

Het Financieel Dagblad wrote upon this developing story:

Dutch Finance Minister Jeroen Dijsselbloem (PvdA) seems to aim at a full sale of ABN Amro by the state. These days the cabinet takes a decision upon the future of the bank, which came in hands of the Dutch government in 2008.

Dijsselbloem expressed his preference for a full sale on Monday-night, during an assembly of the social-democrat PvdA labour party in Amsterdam.

The finance minister called it crucial for the decision upon ABN Amro that the circumstances which caused the crisis in 2008, cannot be repeated anymore in the future. To prevent this from happening, banks should have a more solid financial position, supervision must be sharper than in the recent past and banks should focus on their core activities, according to Dijsselbloem. According to him, banks should not speculate on or deal with stock and derivatives for their own profits.

“I can warrant this without being a shareholder”, answered Dijsselbloem upon a question from the public ‘if stateownership was not the best guarantee to avoid these past events in the future’.

Dijsselbloem seemed not sensitive towards arguments to not sell the bank soon. ‘If the market allows us, I want to return as much money as possible to the Dutch state’, Dijsselbloem stated concerning the billions of euro’s that The Netherlands invested in ABN Amro and Fortis bank. He made clear that he wants to do this at the shortest possible notice: ‘This deal goes about a whole lot of money and we should make critical choices where we invest the state’s money’. This was a clear reference to the additional austerity measures and burden increases that the cabinet is planning to introduce.

In these eyes, there is only one probable reaction from the ABN Amro bank to Dijsselbloem’s statement in red and bold: “Talk to the hand, Dijsselbloem, ‘cause the face ain’t listening anymore. As soon as the state and Zalm have left the building, we return to our old plans and ambitions. National champion instead of a internationally respected bank?! No way, José…”.

To illustrate this supposed opinion of ABN Amro, I show a quote in a second FD article upon ABN Amro:

After an IPO of ABN Amro, the bankers within the bank would like to say goodbye to CEO and ex-finance minister of The Netherlands, Gerrit Zalm. Even when people inside and outside the bank are praising him in public for the ‘peace and quiet that he brought to the bank’.

However, this peace and quiet is colliding with the ambitions of those bankers. They want to play a leading role again as soon as possible. ‘This would bring back their sense of honour and freedom’, according to anonymous sources.

Once a maverick bank, always a maverick bank…

ABN Amro never really said goodbye to its past attitude, when the world was their playground and the sky was the limit. This in contrary to other Dutch banks, like ING Groep NV, who really seem to have returned to more financially sound business. ABN Amro was forced by the circumstances to change its behaviour, but never felt this attitude change by heart.

I’m convinced that we will hear a lot from the ABN Amro in the future; unfortunately it will not be all good news!

And that IPO that Dijsselbloem is planning? It probably will yield €10 – 12 billion Euro at best (just like I said two years ago ), immediately burning €20 billion of the invested tax-payer’s money in ABN Amro. If Dijsselbloem wants to collect more at the international stock exchanges, he will be in for a very rough ride, probably badly damaging his ego.

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