August 23, 2013 / 6:11 AM / 5 years ago

ABN AMRO warns of higher loan impairments to come as profit dips

AMSTERDAM (Reuters) - Dutch state-owned bank ABN AMRO ABRGPA.UL, which is being readied for an eventual sale, warned that the weak domestic economy would lead to higher bad debts this year as second-quarter net profit dipped.

The ABN Amro logo is seen in central London May 29, 2007. REUTERS/Stephen Hird

Finance Minister Jeroen Dijsselbloem is expected to outline his proposals for how and when to privatize ABN AMRO in the next few weeks.

Analysts say an initial public offer could raise several billion euros, providing a welcome boost for the government which has implemented several rounds of austerity measures but is still struggling to bring its budget deficit in line with the European Union’s target.

ABN AMRO said second-quarter net profit slipped 3 percent to 402 million euros ($536.5 million) from the first three months, hit by higher loan impairments as a result of the recession.

“We are predominantly exposed to the Dutch economy and hence to the current economic downturn, which led to a sharp rise in loan impairments,” Chief Executive Gerrit Zalm said in a statement, warning that loan impairments for the full year would exceed last year’s level.

“Domestically-focused small and medium-sized enterprises in particular were hit hard by the decline in consumer spending.”

Zalm said in June that ABN AMRO was ready for a public listing on a stock market.

“We are now profitable. Even in a difficult year, 2012, we made a decent profit. Our capital position is in order. So we can return to the stock market. It is now up to the (Dutch finance) minister to decide about it,” Zalm told a Dutch talk show.

Nico van Geest of Keijser Capital said he estimated ABN AMRO’s value at about 11 or 12 billion euros. Assuming the state kept a minority stake, the government could aim to raise about 8 or 9 billion euros in an initial public offering.

That would fall short of recouping the 30 billion euros used to rescue ABN AMRO, but would be a welcome contribution to the budget at a time when the Netherlands needs to meet the European Union’s budget deficit target of 3 percent of economic output.

The Dutch operations of ABN AMRO and Fortis were nationalized when the Belgian-Dutch Fortis group lost investors’ confidence at the height of the credit crisis in 2008. At the time, ABN AMRO was owned by Fortis.

Reporting by Sara Webb; Editing by David Cowell

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