Against the background of financial crisis, the purchase of Dutch bank ABN Amro has proved to be a fiasco both for Fortis and Royal Bank of Scotland. RBS reports record losses for 2008, and it's largely down to the ABN Amro takeover.

It was the biggest takeover of all time in the financial sector. In October 2007 a consortium of three banks took control of Dutch bank ABN Amro. Royal Bank of Scotland (RBS), the engine behind the hostile bid, set another financial record on Monday. It announced the biggest loss in British corporate history, at 28 billion pounds (30,2 billion euros) for 2008.

Most of the loss comes from writing off bad loans and investments related to the purchase of ABN Amro. In total the write-offs will amount to an equivalent of between 16.2 and 21.6 million euros.

Brown not amused
Bank share prices tumbled in response to the announcement, which came just as the British government was launching fresh measures to bolster the financial sector. Speaking at a press conference, British Prime Minister Gordon Brown was none too pleased at the bad news from RBS.

"Yes, I am angry at the Royal Bank of Scotland and what happened. Almost all their losses are in the subprime markets in America and related to the acquisition of the bank ABN Amro. And these are irresponsible risks which were taken by a bank with people's money in the United Kingdom."

Another member of the consortium behind the ABN Amro take-over, Belgian bank Fortis, was nationalised by the Benelux governments last year. Now RBS has no choice but to take more of the same kind of medicine. The British government is stepping in for a second time, albeit not with full nationalisation. It will increase its share in the bank from 58 to 70 percent.

What else?
There is much speculation as to what else RBS could do to improve its financial health. Logical as it might seem, the bank won't be selling off its portion of ABN Amro. It would not be an easy matter to detach the bank's wholesale division and renowned international network. Moreover, it was precisely this division that drew the Scots' attention in the first place. Gordon Brown will be obliged to hold on to it if he wants to see any earnings on his enforced investment.

Meanwhile, ABN Amro Holding responded to the bad news from Edinburgh on Monday with an interim report for 2008. Still owned by the consortium partners, the company announced provisional profits of 3.5 billion euros. Not that there will be much left for the bank's Dutch branch. The figure mostly comprises book profits on Brazilian and Italian subsidiaries, which fall to Santander.

Santander suffering least
Of the consortium banks, Santander seems to be suffering least from the credit crisis and its part in the takeover in the Netherlands. Even so, to investors' surprise, two months ago the bank found itself obliged to raise seven billion euros on the capital markets. And like Fortis, the Spanish bank turned out to be a major customer of derailed conman Bernard Madoff. Nonetheless, Santander has come off best overall. Fifteen months after the ABN Amro takeover, the values of Fortis and RBS have been decimated to 3.5 and 5.5 billion euros respectively. Santander's value has dropped by 40 percent, but it's still worth more than 46 billion euros.

*rnw translation (mb)

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