Real estate ‘problems’ lead Dutch to nationalise bank

Europe has been rocked by the nationalisation of a Dutch bank that has suffered from bad property loans.

Just when international investors had begun to embrace Europe as a stable region, the Netherlands’ Minister of Finance has revealed that SNS Reaal would receive a €3.7 billion state aid package to stop it buckling under the weight of property loans that once stood as high as €14 billion in 2009.

In a dramatic statement today, the Dutch government said: “The Minister of Finance, in close consultation with De Nederlandsche Bank (DNB), has nationalised SNS Reaal. Savings deposits of clients are secure and the service provision of SNS REAAL has been safeguarded. The intervention has averted grave threats to financial stability and the economy.”

It continued: “Nationalisation under the Invervention Act (Interventiewet) has become necessary because SNS REAAL finds itself in acute distress on account of its real estate problems. DNB had asked the institution to produce a solution before the firm deadline of 31 January 2013, 18:00 hours. The absence of such a solution, would mean bankruptcy for SNS Bank and put the Dutch financial system in serious and immediate danger.”

SNS Reaal, the fourth largest financial institution in the Netherlands, received €750 million of state in 2008 alongside other wounded financial institutions that were helped to the tune of €40 billion such as ING Group and Aegon in the wake of the financial crisis.

Since then, the government has tried to find a private sector solution, however Jeroen Dijsselbloem, the Netherlands’ finance minister, said in a statement it had looked at every alternative involving private parties, but found none that could guarantee the stability of the Dutch banking system. It was reported on Thursday that private equity firm CVC Capital Partners was leading a consortium to pump up to €1.8 billion into the organisation, but it appears that option is now dead.

The government is to forgo the €750 million aid it already provided and will provide €2.2 billion of new capital. In addition it will write off €700 million in the value of the banks real estate portfolio.

By June 2012, SNS’s book value of its property loans stood at €8.55 billion, with around three quarters of the portfolio being exposed to the hard-hit Dutch real estate sector as opposed to non-domestic markets. The value of its bad loans has reportedly almost doubled since 2010 to around €2 billion. Today’s rescue package contains a plan to spin off the property portfolio into a separate entity.

Ronald Latenstein, the group’s chief executive, resigned amid the government’s intervention, as did its chief financial officer and chairman of the board of directors.