ABNAmro is back on its own feet again
Up 3.4 percent after return
ABN AMRO Group, 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 (R48.7bn).
The bank sold 188 million shares at 17.75 a share in the initial public offering (IPO), equivalent to a 20 percent stake and valuing ABN Amro at
16.7bn, according to a statement on Friday. The stock closed at 18.35 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.
ABN Amro, the secondlargest 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 (RBS), Banco Santander and Fortis. The Dutch state, which spent almost 22bn 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 10bn in financial services stocks at Orix’s Robeco Groep 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 a share.
ABN Amro’s 72bn takeover, the financial services industry’s largest ever, proved disastrous when the crisis struck in 2008.
The UK government bailed out RBS, while the Netherlands had to buy the Dutch banking and insurance units of Fortis for 21.7bn.
The government enlisted Gerrit Zalm, a former finance minister, as chief executive 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, a director of NL Financial Investments, which owns nationalised financial companies on behalf of the Dutch government.
“You don’t know how hard you have to work for a bank to become boring.”
Uproar
Finance Minister Jeroen Dijsselbloem delayed a decision on the IPO in March, when a
100 000 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 planned 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 $24.1bn (R335.8bn) in assets under management, said.
“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. – Bloomberg VOLKSWAGEN (VW) cut
1 billion (R14.78bn) from its 2016 investment plan on Friday, as its emissions cheating scandal expanded to include tens of thousands more US vehicles.
VW had told US regulators that emissions issues in larger luxury cars andsports uitlity vehicles extended to an additional 75 000 vehicles dating back to 2009, the US Environmental Protection Agency (EPA) said on Friday.
The disclosure widened the VW scandal, which had previously focused mainly on smaller-engined, mass-market cars, and raised the possibility that engineers at both the Audi and VW brands could have been involved in separate emissions cheating schemes.
Earlier on Friday, the supervisory board of Europe’s biggest car manufacturer said it would cap spending on property, plant and equipment at around 12bn next year, down about 8 percent on its previous plan of around 13bn.
VW is battling the biggest business crisis in its 78-year history after admitting in September that it had cheated diesel emissions tests in 482 000 2-litre diesel cars sold in the US since 2009.
In November, the EPA and California Air Resources Board also accused VW of evading emissions in at least 10 000 Audi, Porsche and VW SUVs and cars with 3-litre V-6 diesel engines. VW initially denied the findings. But during during a meeting last week, VW and Audi officials told the EPA that all 3-litre diesel engines from model years 2009 to 2016 had higher emissions than allowed.
The new disclosure covered a total of 85 000 vehicles, the EPA said, including the diesel Audi 2016, Audi A6 Quattro, A7 Quattro, A8, A8L, Q5, Porsche Cayenne and VW Touareg.
Analysts have said the scandals could cost the company 40bn or more in fines, lawsuits and vehicle refits.
The widening scandal “slows VW’s ability to move beyond the negative headlines and start the rebuilding process”, said Karl Brauer, a senior analyst at Kelley Blue Book.
“You can’t recover from a scandal while it’s still growing. You have to reach a point where everything is on the table and no more bad news is coming – then you can start repairing the damage.” – Reuters THE IMPLEMENTATION of measures to lower Zambia’s fiscal deficit would go a long way towards restoring market confidence, the International Monetary Fund said on Friday. “The pressures on the economy have not only reflected the impact of external shocks but also the waning market confidence,” the IMF said. “Fiscal discipline has been undermined by additional spending commitments that stand in contrast to lower-thanbudgeted revenues.” – Reuters
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