SNS Reaal NV (SR), a Dutch bank and insurer struggling to wind down a money-losing real estate lending unit, fell the most in more than two months after a report said it may have to post a 1.8 billion-euro ($2.4 billion) writedown on property-finance loans.
The shares declined as much as 11 percent to 85 euro cents, the biggest intraday drop since Nov. 6, and were down 6.4 percent as of 1:53 p.m. in Amsterdam. They have fallen 14 percent this year, giving the Utrecht, Netherlands-based company a market value of 255 million euros.
SNS may have to write down 1.2 billion euros to 1.8 billion euros on a property finance portfolio of more than 8 billion euros, Het Financieele Dagblad reported today, citing unidentified people. A plan to make ING Groep NV (INGA), Rabobank Groep, ABN Amro Group NV investors in a planned bad bank to help SNS Reaal was blocked by European Union regulators, it said. ING and ABN Amro had both received state aid.
“We know they need more capital,” said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets with a reduce rating on the shares. “In any scenario, whether involving other Dutch banks or the state, it’s clear that there will be a massive dilution for existing shareholders.”
SNS, which acquired ABN Amro’s property-finance unit in 2006, has been hurt by losses on real estate loans that have left it struggling to repay a government bailout. Its banking unit’s core Tier 1 capital ratio, a measure of financial strength, fell to 8.8 percent at the end of the third quarter, below the European Banking Authority’s 9 percent minimum, as risk-weighted assets and loan losses in the property-finance unit increased, most recent figures show.
The firm, which went public in 2006, last year started exploring options to repay state aid while maintaining sufficient capital. Measures could include asset sales, limiting credit risks in the property-finance unit and giving a stake in the bank to the government, it has said.
Jeroen de Graaf, a spokesman for SNS Reaal, said the company is studying options to come to a “comprehensive solution.” No decisions have been made, he said by telephone today. He declined further comment on the report.
Officials at the Dutch Finance Ministry and the Dutch central bank declined to comment on the report, as did ING, Rabobank and ABN Amro officials.
The “higher rumored impairment” will lead to more dilution for shareholders, Cor Kluis, an analyst at Rabobank International with a reduce rating on SNS Reaal, said in a note today. Kluis had estimated 700 million euros in impairments.
SNS received 750 million euros from the Netherlands in 2008 and 500 million euros from Foundation Beheer SNS Reaal, its largest shareholder. It sold shares in 2009 to help repay 250 million euros of aid, of which 185 million euros was returned to the government.
If the lender fails to repay the aid by 2013, European regulators could force additional asset sales.
“There are ongoing informal contacts at the technical level between the commission and the Dutch authorities concerning the situation of SNS Reaal,” Antoine Colombani, spokesman for EU Competition Commissioner Joaquin Almunia, told reporters in Brussels today.
ABN Amro and ING are banned from takeovers as part of restructuring agreements with the European Commission to gain approval for state aid during the financial crisis, he said.
SNS Reaal is the smallest of the four Dutch banks designated as “systemically important,” or too big to fail, by the Dutch central bank. It has 32.5 billion euros in consumer savings deposits, according to a presentation published on Nov. 15. ING, Rabobank and ABN Amro are its three larger competitors.
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