ABN Amro May Fetch Premium to Peers as State Cuts Stake

  • Dutch government selling 23 percent stake in bailed-out bank
  • IPO is largest for bank in Europe in more than eight years

ABN Amro Group NV is returning to markets at a premium to European peers seven years after the Dutch government bailed out the bank.

The government is selling a 23 percent stake in the nationalized lender at between 16 euros and 20 euros a share, the company said in an e-mailed statement Tuesday. At the high end, that would value the bank at more than 18.8 billion euros.

ABN Amro’s tangible book value at the end of September was 15.8 billion euros, according to spokesman Jeroen van Maarschalkerweerd. This indicates ABN Amro may start trading at about 1.2 times book value compared with an average book value of 1.1 for the 46-member firms tracked by STOXX Europe 600 Banks Index.

“The valuation is looking solid,” said Jos Versteeg, an analyst at Theodoor Gilissen Bankiers NV. “Whichever premium the government and ABN Amro may get after all these years will depend on the market climate in the end.”

Concerns about China’s growth outlook rocked markets during the summer, making public offerings a more difficult proposition. French asset manager Amundi SA on Tuesday narrowed its IPO price range to the lower end.

Biggest IPO

The state, which spent 22 billion euros to bail out the bank following the 2008 financial crisis, is seeking to recoup as much as 4.3 billion euros ($4.6 billion) in the first of a series of stake sales. The shares are set to begin trading in Amsterdam on Nov. 20 under the symbol ABN.

“We’re going to sell it as good as possible with the best possible proceeds,” Finance Minister Jeroen Dijsselbloem told reporters in Brussels on Tuesday. “In the next couple of years we will be busy selling tranches.”

The offering is shaping up as Europe’s largest banking IPO since Russia’s VTB Bank raised 6 billion euros more than eight years ago. Spanish lenders CaixaBank SA and Bankia SA raised 3.9 billion euros and 3.1 billion euros respectively in September 2007 and April 2011.

The government will retain some control over the shares through a foundation, or stichting, that can seize the voting rights of investors for up to two years to block a takeover or other situation deemed hostile. Known as the Dutch discount, this could weigh on the share price.

ABN Amro is a remnant of the former ABN Amro Holding NV, one of the world’s largest banks when it fell prey in 2007 to a group including Royal Bank of Scotland Plc, Banco Santander SA and Fortis NV. The 72 billion-euro takeover, the industry’s largest-ever, proved disastrous for RBS and Fortis when the financial crisis struck a year later.

The U.K. government bailed out RBS, while the Netherlands seized the Dutch banking and insurance units of Fortis and enlisted Gerrit Zalm, a former finance minister, to rebuild ABN Amro into a smaller bank focused on its home market.

Retail Investors

“Obtaining a listing is a logical step following the strides we have made in our development since the establishment of ABN Amro in its current form in 2010,” the chief executive officer said in the statement Tuesday. “Our business case is solid, we have a moderate risk profile and are able to offer our clients a broad range of services.”

The second quarter was the most profitable three months for the bank since it was reinvented in 2010. ABN Amro said in September that it plans to pay out 50 percent of profit in dividends in 2017, up from 40 percent this year.

ABN Amro Monday reported a 13 percent rise in third-quarter profit on lower writedowns of bad loans. Underlying net income, which strips out one-time items, rose to 509 million euros from 450 million euros a year earlier.

The government held off a decision on the size and timing of the IPO earlier this year after the bank came under fire for giving each of six board members a 100,000-euro raise. Dijsselbloem said in May that the government would go ahead with the IPO as soon as this year and that it may sell as much as 30 percent of its stake.

“ABN has gone quite conservative. They have to make it a success,” said Corne van Zeijl, who manages 1 billion euros on behalf of Actiam NV. “The low percentage of shares on offer is clearly at the bottom end of expectations.”

At least 10 percent of ABN Amro shares will go to retail investors, who’ll receive a preferential treatment when subscribing to the offering, according to a letter Dijsselbloem sent to the Dutch parliament.

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