SAVIOUR OF THE SAVERS: Mark Rutte makes a point at this year’s World Economic Forum in Davos. Picture: BLOOMBERG
SAVIOUR OF THE SAVERS: Mark Rutte makes a point at this year’s World Economic Forum in Davos. Picture: BLOOMBERG

AMSTERDAM — Dutch Prime Minister Mark Rutte has defended the €3.7bn nationalisation of SNS Reaal, the fourth-largest Dutch bank, as the only way to protect savers and the banking system.

"The collapse of SNS would have put both in danger," Mr Rutte said at the weekend. "We needed to intervene."

The state intervention resulted in the bank’s senior executives resigning.

SNS, which acquired ABN Amro Holding’s property-finance unit in 2006, has been hit hard by losses on real estate loans that left it struggling to repay a government bail-out before next year’s deadline and bolster capital. The nationalisation affects issued shares, core tier-1 capital securities and subordinated bonds, the finance ministry said.

The move comes less than five years after the Netherlands bought Fortis’s Dutch banking and insurance units and its stake in ABN Amro for €16.8bn when the company ran out of short-term funding and customers withdrew deposits. The government also provided aid to the biggest Dutch financial-services company, ING Groep, and Aegon at the time.

"We carefully looked at all the alternatives," said Mr Rutte.

"We understand very well that many people don’t like the idea that again a bank in need needs to be helped."

SNS shares were suspended in Amsterdam on Friday. They traded at 84c on Thursday, valuing the company at €242m, and have declined 57% in the past year. The shares were sold for €17 in SNS Reaal’s 2006 initial public offering.

SNS Reaal’s junior bonds plunged. Its €250m of 6.258% tier 1 perpetual notes were quoted at 25c, or 61%, lower at 15.5c in London, data showed.

Finance Minister Jeroen Dijsselbloem said while the government would "expropriate" SNS equity and subordinated debt, senior bondholders would not be affected. Senior bonds were quoted higher.

"I scrutinised all alternative solutions involving market parties," said Mr Dijsselbloem, who was appointed chairman of euro finance meetings last month.

"I found myself compelled to conclude no acceptable total solution was offered. I therefore had to use the instrument of last resort … nationalisation."

SNS CEO Ronald Latenstein, chief financial officer Ference Lamp and supervisory board chairman Rob Zwartendijk had stepped down, said Utrecht, Netherlands-based SNS. The "reason for this decision is that they don’t want to and can’t take responsibility for the nationalisation scenario", SNS said.

Trading in securities that were not expropriated would resume at a later time, according to Martijn Pols, a spokesman for financial markets regulator AFM in Amsterdam.

The state will inject €2.2bn of capital into SNS Reaal, write down €800m on its earlier aid package and use €700m to put the real estate portfolio at arm’s length. SNS’s real estate investments had a book value of €8.55bn at the end of June, the finance ministry said. That compares with SNS Bank’s balance sheet of €82.3bn. Dutch banks on average hold 4.5% of assets in commercial real estate.

"The issue is unique in the Dutch banking landscape," central bank director Jan Sijbrand said in The Hague. "There is no other bank that equals €terms of problems in quality and composition of the loans."

A study commissioned by the Dutch government found SNS Property Finance would face additional losses of as much as ¤3.2bn in a negative scenario, the finance ministry said. On January 18, the Dutch central bank gave SNS a deadline of 6pm on Thursday to either add €1.9bn of core capital or present a feasible solution. It did not meet the deadline.

Bloomberg