Property | International

Time ripe for a “bad bank”

Dutch bank is considering such a move

  • Reuters
  • Published: 13:15 November 1, 2012
  • Gulf News

Amsterdam: Dutch bank and insurance group SNS Reaal is considering a so-called “bad bank” for its property finance unit to cope with expected losses there and help pay back state aid received in 2008, a Dutch paper has reported.

A bad bank separates assets which can yield considerable losses from the healthier part of a business, making it easier for the latter to continue its operations.

SNS Reaal, which needed 750 million euros of state aid in 2008, has struggled to turn around its loss-making property finance division, holding back its recovery to pre-crisis profit levels and limiting its ability to repay state aid. A spokesman for the Netherlands’ fourth largest bank said SNS Reaal was looking at all options.

“We are still looking at a range of options, as we said in July and August. All possible combinations of options. No decisions have been taken yet,” spokesman Jeroen de Graaf said.

In July, SNS Reaal said it was considering the sale of its insurance business, which is one of its main cash generators.

The Dutch central bank, in consultation with SNS Reaal, has asked the three biggest Dutch banks - ING, Rabobank , and ABN AMRO - whether they could help create a bad bank for SNS Reaal, the paper said, citing bankers familiar with the matter.

The three big banks have responded reticently because the 4.8 billion euro property portfolio’s potential losses are unclear, the paper said.

One solution would be a full or partial government guarantee, the paper said.

SNS Reaal, which has recorded more than 1 billion euros of net losses on its property finance business since 2009, still needs to pay back 564 million euros of state aid plus a 50 percent premium, and 415 million euros of aid from a foundation, which also owns half of SNS Reaal’s ordinary shares.