The Dutch government is poised to proceed with an initial public offering of ABN Amro Group NV that may value the bank at as much as 20 billion euros ($22.4 billion), according to people with knowledge of the sale, helping to recoup part of the lender’s state bailout.
Dutch Finance Minister Jeroen Dijsselbloem may present the plan as soon as Friday, sticking with the objective of selling stock this year in what may be the country’s biggest IPO ever. The transaction could value ABN Amro at between 15 billion euros and 20 billion euros, said the people, who asked not to be identified because the discussions are private.
A public outcry over pay rises for some board members and regulatory probes into alleged internal policy breaches at the bank in recent weeks threatened to delay the IPO as lawmakers questioned whether the company was fit for sale. Chief Executive Officer Gerrit Zalm has sought to quell that concern by apologizing publicly over the botched increase in compensation, which came as the bank boosted profit to the highest in four years.
Zalm’s apologies “are a strong signal,” Dijsselbloem said in an interview on RTLZ television on Tuesday. “The cabinet has the ambition to make a start with the IPO this year.”
A spokeswoman for the finance ministry said she couldn’t comment on the ministers’ meeting agenda.
“We have to wait until the shareholder considers the time right for an IPO,” said Jeroen van Maarschalkerweerd, spokesman for ABN Amro. “Our preparations are on schedule.”
With the IPO, Dijsselbloem is seeking to recover the Netherlands’ 22 billion-euro investment in the lender. A record 71.9 billion-euro takeover of ABN Amro by three banks on the cusp of the financial crisis ended in the company’s breakup and forced the Dutch government to nationalize parts of the institution and bail out firms, including ING Groep NV, amid a credit crunch.
Time is running out for an IPO this year. Dijsselbloem had planned to inform parliament on the sale in the first quarter. Last month, he told lawmakers in The Hague that if the government had decided to initiate the IPO in that period, the listing would have probably taken place in October or November.
At 20 billion euros, the bank would probably trade at about 1.25 times its tangible book value, according to three stock analysts who cover the banking industry. At that price the valuation would be higher than rivals such as ING, Deutsche Bank AG and BNP Paribas SA. ABN Amro’s underlying net profit in the first quarter, which strips out one-time items, rose 44 percent to 543 million euros from 311 million euros a year earlier.
Selling points for the shares will probably include ABN Amro providing steady dividend payments and offering investors a bet on the recovery of the Dutch economy, according to people familiar with the matter.
The government has yet to pick underwriters for the sale. ABN Amro management has met with investors in the U.S. about a potential sale, with the help of advisers including Morgan Stanley, the people said.
In March, a 100,000-euro salary increase for six of its board members prompted the resignation of a supervisory board member. Meanwhile, an internal inquiry in Dubai showed ABN Amro staff failed to comply with company guidelines. The Dutch central bank and the Dubai Financial Services Authority are continuing to investigate the alleged violations. The sale process can only start if Dijsselbloem’s IPO plans get sufficient support in parliament.
“On the compliance side one must have its concerns by definition,” said Arnoud Boot, a professor of corporate finance and financial markets at the University of Amsterdam. “You should question whether a bank like ABN Amro, which is going through such a big transition, has been able to fine-tune its compliance sufficiently.”
The bank failed to identify corruption risks, particularly in the activities that finance the energy, commodities and transportation industries, the Dutch central bank said in a letter to the lender in February.
Dijsselbloem aims to sell an initial stake of 10 percent to 20 percent in the company during 2015, indicating the IPO may raise 4 billion euros.
“Dijsselbloem doesn’t want to have a larger discussion on what the Dutch financial sector should look like,” said Boot. “The easiest way to prevent such a discussion is to return ABN Amro to the market as soon as possible.”