Bailing out a bank is easier than manoeuvering it back onto the market, writes Jan-Maarten Slagter.
If you think nationalising banks is tricky, try privatising a state bank. Cutting up a financial institution in a crisis and dividing it up among neighbouring countries (Fortis) or just expropriating shares (SNS Reaal) take a bit of doing. But if needs must it can be done quickly.
Moving a bank back into private ownership is a different thing altogether. The politicians need to agree, for one, but more importantly, who’s going to buy the shares?
This week, politicians in the UK discussed the British stakes in Lloyds Bank (39%) and the Royal Bank of Scotland (RBS, 81%). According to the Financial Times, chancellor George Osborne plans to sell off the stakes before the elections of 2015. The present Lloyds share price is close to the level at which the UK bought the shares which makes this a politically viable decision.
This is not the case with RBS and, moreover, the government stake in the bank is twice as big. According to ex-RBS chief Stephen Hester, the pound for pound sell-off of RBS shares could take until 2023.
So what will happen to ABN Amro, the merged bank (including the Dutch part of Fortis Bank) bailed out by the Dutch state in October 2008 for €28bn? Contrary to Lloyds and RBS, it is as yet unlisted while the government stake is 100%. This means investors will have to start from scratch with ABN Amro.
The preparations for the sale of ABN Amro will start this year. The sale proper will not take place until after 2014 according to the finance ministry. The cabinet has said the financial sector needs to be ‘stable’ and ‘the market prepared for the transactions’. The institutions involved also need time to prepare for the sale. The aim of the exercise is to recoup as much of the government investment as possible. A cynic would say in that case ABN Amro will probably remain in state hands for ever, but I’m not a cynic. But it is doubtful whether all these conditions will be met by next year.
If they are, finance minister Jeroen Dijsselbloem will prefer a stock market launch to the two most obvious alternatives: a sell-off to another (foreign) bank or a private equity. A complicating factor would be that not six months ago the SNS Reaal shares were expropriated without compensation – not a great incentive to buy Dutch bank shares. Another ‘if’ is whether the political wish to retain a certain measure of control, apart from the supervision of the central bank, will sit well with a listing.
Maybe the politicians in The Hague will be inspired by an alternative that has been floated in the UK lately and is gaining approval: divvy up the RBS shares among British households. Every tax payer his own little piece of ABN Amro – and why not, he’s paid for it already.
Jan-Maarten Slagter is director of the Dutch Investors’ association Vereniging van Effectenbezitters (VEB).
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