ABN Amro to receive further €2.5bn bailout

The Netherlands will inject €2.5 billion (Dh12.9bn) into state-controlled ABN Amro to help split the group up, but the bank's part owned by RBS is expected to have a shortage of capital, said the Dutch Finance Ministry. The Dutch Government bought Fortis Bank Nederland last October, including its interests in ABN Amro Nederland after former parent Fortis lost the confidence of its customers and shareholders. A consortium consisting of Belgian-Dutch Fortis, Royal Bank of Scotland and Spain's Santander had bought the ABN Amro group for €70bn in 2007. When the Dutch Government intervened, it acquired a stake in some ABN Amro assets that had not been assigned to consortium members. "These assets now have a negative value and the share of the Dutch state in that value is currently €2.2bn," Dutch Finance Minister Wouter Bos wrote in a letter to the parliament. When combined with other costs related to splitting up ABN Amro between the consortium members, there was an immediate need for €2.5bn, Bos said, adding that without the recapitalisation, the breakup – expected by the end of the year – could not take place. "If Santander withdraws its capital as part of the separation, there will be shortages [of capital] in the parts [controlled by] RBS and the Dutch state," said Bos. He added that both the Dutch Government and RBS needed to "adequately capitalise their future parts". ABN Amro Nederland will also need more capital in the future as the group is split up and for a planned merger with Fortis Bank Nederland, as well as for other reasons, including complying with a European Commission (EC) directive that some operations be sold off, Bos said. As part of the ABN takeover, Fortis agreed to sell about 10 per cent of ABN's Dutch operations to comply with anti-trust concerns and ABN Amro will have to cover credit risks. Bos said an "interested party" was discussing purchasing ABN assets and he expected a deal this summer. He did not say whether the party was Deutsche Bank. A deal with Deutsche Bank was put on hold last year. The Netherlands is funding the €2.5bn partly by taking on credit risks for €34.5bn of Dutch mortgages, lowering ABN's capital needs by €1.7bn and by issuing a convertible bond of €0.8bn to ABN Amro Nederland, said Bos. Bos reiterated that the plan was to combine, then privatise the Dutch operations of Fortis and ABN in 2011 or later, while keeping them sheltered from the turmoil in global financial markets. Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here .