Dutch group SNS Reaal gets EUR 1.25 bn 'buffer'

Banking and financial services group SNS Reaal is to receive EUR 750 mln from the Dutch state, plus a further EUR 500 mln from its controlling foundation. The firm emphasised that its business was sound and that the extra liquidity should be seen as an extra 'buffer' against a potential worsening of the climate rather than a 'lifeline'.

SNS Reaal is based in the Dutch city of Utrecht and listed on Euronext Amsterdam. In early trading on Thursday SNS’s share price was down 1.2% at EUR 4.94 on the close the day before. SNS is the third Dutch financial institution to seek government aid after ING, the country’s largest banking group, and insurer Aegon.

The bank's SNS Property Finance unit is the second largest real estate financier in the Netherlands and also operates in several European markets and the US. Its portfolio of project and investment finance stood at EUR 14 bn in 2007.

The announcement of the liquidity injections came on Thursday as the bank revealed a third-quarter net loss of EUR 88 mln, which it attributed to EUR 177 mln in writedowns relating to the global credit crisis. However, the financial group reported net profit of EUR 138 mln, and an underlying net profit of EUR 305 mln, for the first nine months of 2008.

CEO Sjoerd van Keulen said the group's various businesses were performing fairly well and that the liquidity injections were a form of insurance policy against further worsening in the financial markets.

SNS Reaal said it will issue EUR 750 mln of non-voting core Tier 1 securities to the Dutch state at a price of EUR 5.25 per security and EUR 500 mln of non-voting core Tier 1 securities to SNS's controlling foundation, Stichting Beheer SNS REAAL.

The group reported a modest increase in net profit at SNS Property Finance in spite of higher value adjustments. 'Interest income was up significantly, helped by the positive impact of re-pricing of the portfolio. Operating costs were up slightly compared to last year and flat compared to the first half of 2008.'

'Trends on international real estate markets suggest a further increase in value adjustments in the future. Net profit was up compared to last year and somewhat lower than in the first half of 2008,' the company said.