ABN's Initial Sale Raises $3.6 Billion as Government Cuts Stake

  • ABN valued at $17.8 billion after Dutch government sells stake
  • Shares close 3.4 percent higher in lender's trading debut

ABN Amro Group NV, a lender bailed out by the Dutch government during the financial crisis, closed 3.4 percent higher on its return to the market after raising 3.3 billion euros ($3.5 billion).

The bank sold 188 million shares at 17.75 euros apiece in the initial public offering, equivalent to a 20 percent stake and valuing ABN Amro at 16.7 billion euros, according to a statement on Friday. The stock closed at 18.35 euros in Amsterdam. ABN Amro started trading at about 1.1 times book value compared with an average book value of 1.15 for the 46 member firms tracked by the Euro STOXX Banks Index.

Gerrit Zalm at AEX for ABN Amro's IPO

Photographer: Jasper Juinen/Bloomberg

ABN Amro, the second-largest bank in the Netherlands, is a remnant of the company that fell prey to a takeover in 2007 by a group including Royal Bank of Scotland Group Plc, Banco Santander SA and Fortis NV. The Dutch state, which spent almost 22 billion euros to rescue the bank the following year, is recouping part of its investment in the first of a series of stake sales. Under government ownership, ABN Amro transformed itself from one of the world’s largest banks to a consumer lender focused on the Netherlands.

Clear Model

“The Dutch financials are punching above their weight again,” said Patrick Lemmens, who helps oversee about 10 billion euros in financial-services stocks at Orix Corp.’s Robeco Groep NV in Rotterdam. “It’s a prime example of a solid, dividend-paying bank with a clear model and good profit going back to market.”

The government may retain some control over the shares even after it cuts the holding further through a foundation, or stichting, that can seize the voting rights of investors for as long as two years to block a takeover or other situation deemed hostile. The shares had been on sale for as much as 20 euros apiece.

ABN Amro’s 72 billion-euro takeover, the financial services industry’s largest ever, proved disastrous when the crisis struck in 2008. The U.K. government bailed out RBS, while the Netherlands had to buy the Dutch banking and insurance units of Fortis for 21.7 billion euros.

The government enlisted Gerrit Zalm, a former finance minister, as chief executive officer to rebuild ABN Amro into a smaller lender focused on its home market.

"The new ABN Amro proves things have changed in the financial sector," said Michael Enthoven, director of NL Financial Investments, which owns nationalized financial companies on behalf of the Dutch government,. "You don’t know how hard you have to work for a bank to become boring."

Late Arrival

Finance Minister Jeroen Dijsselbloem delayed a decision on the IPO in March, when a 100,000-euro salary increase for six ABN Amro board members caused an uproar among lawmakers and prompted the resignation of a supervisory board member. The group subsequently gave up the increase.

Dijsselbloem said in May that the government would go ahead with the IPO as soon as this year and that it might sell as much as 30 percent of its stake. The Dutch state plans eventually to completely exit the company.

ABN Amro’s return on equity, a measure of profitability, was unchanged in the third quarter from a year ago at 12.7 percent. The firm said in September that it plans to pay out 50 percent of profit in dividends in 2017, up from 40 percent this year.

Regulation Burden

“If you look at all the regulation surrounding banks like ABN Amro, it’s going to get increasingly more difficult for them to generate attractive returns on equity,” Lodewijk van der Kroft, a partner at Comgest, which has $24.1 billion in assets under management, said by phone. “Not a day goes by that you’re not confronted with a bank that has to pay a fine.” 

ABN Amro has not been immune. An internal inquiry in Dubai this year showed staff failed to comply with company guidelines, prompting some people to leave the lender. The Dutch central bank and the Dubai Financial Services Authority fined the firm for the alleged violations.

About 10 percent of the offer was allocated to retail investors. They received preferential treatment when subscribing to the offering, according to a Friday statement from NLFI, which owns nationalized financial companies on behalf of the Dutch government.

Banks managing the offer had recommended a sale price of 17.50 euros after order-taking was completed Thursday and a price of as much as 18 euros was discussed with the government, people with knowledge of the discussions told Bloomberg.

The shares trade as depositary receipts with one DR equal to one share.

Morgan Stanley, Deutsche Bank AG and ABN Amro are managing the IPO, along with Bank of America Corp., Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., ING Groep NV and Rabobank. Rothschild acted as financial adviser to the government and Lazard Ltd. was adviser to the company.

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