Dutch bank SNS Reaal to be nationalised due to property finance fiasco

Dutch bank and insurance group SNS Reaal, in trouble because of heavy losses on its €8 bn property finance division, is to be nationalised, the Dutch finance ministry announced on Friday.

Finance minister Jeroen Dijsselbloem said a state bailout was necessary to prevent the Netherlands' fourth-largest bank from collapsing.

'Without state intervention the bank would have gone irrevocably bankrupt,' he told an early morning press conference in The Hague.

The bank, the minister said, did not have sufficient resources to cover the losses at its property financing division. SNS financed real estate projects in both the Netherlands and other European markets.

The direct costs of the nationalisation amount to €3.7 bn - a capital injection of €2.2 bn, €800 mln in writedowns on the mortgage portfolio and €700 mln to isolate the real estate portfolio. The state is also providing over €6 bn in loans and guarantees.

The state rescue thwarts attempts by private equity firm CVC Capital Partners to take over SNS. A consortium led by CVC had been seeking to pump up to €1.8 bn into the bank. SNS had until 6pm on Thursday to present a plan to make uo a €1.9 bn capital shortfall.

Dijsselbloem suggested on Friday that the CVC option would have involved the state taking a hefty financial risk without having a say in decision-making processes at SNS.

A new board has been appointed to the bank following the resignation of CEO Ronald Latenstein, CFO Ference Lamp and Rob Zwartendijk, head of the supervisory board. Gerard van Olphen, currently a supervisory board member, will now take the reins as CEO.

The new board's mission will be to sell parts of the banking group back to the private sector.

SNS is the fourth largest banking and insurance group in the Netherlands with a total balance sheet of €130 bn. It is the second bank to be nationalised in the Netherlands since the nationalisation of ABN Amro at the height of the financial crisis in 2008.

In that year SNS received a state bailout of €750 mln, and while most of the bank's activities were healthy the property financing division continued to book heavy losses which destabilised the entire group.