France's BNP Paribas approached Dutch state to buy ABN, source says

2/2 © Reuters. FILE PHOTO: A man walks past the logo of BNP Paribas at the bank's building in Issy-les-Moulineaux, near Paris, France, February 3, 2022. REUTERS/Gonzalo Fuentes 2/2

PARIS/AMSTERDAM (Reuters) -France's biggest lender BNP Paribas (EPA:BNPP) signalled to the Dutch government an interest in taking over state-owned bank ABN Amro, a person with knowledge of the matter said on Friday, adding that the Dutch finance ministry was not pursuing such a deal at this time.

A combination between BNP and ABN AMRO (AS:ABNd) would be the first major cross-border deal in a long-anticipated consolidation drive across Europe's banking sector.

News of the approach, first reported by Bloomberg News, sent ABN Amro shares surging in Amsterdam. Spokespeople for BNP and ABN declined to comment, while the Dutch finance ministry said in a statement it was seeking advice on selling down its stake.

By 1450 GMT, shares in ABN Amro, the Netherlands' third-biggest bank with a market capitalisation of 4.8 billion euros, were up 6.3% at 10.92 euros, below an earlier peak of 12.16 euros, which prompted a halt in trading.

A second source close to the matter said BNP was not engaged in any "process" for an ABN acquisition, adding that it would not fit the French bank's strategy.

The Dutch finance ministry said it had recently sought advice from NLFI, a body that holds assets for the government, "on the further sale of shares in ABN Amro" but would not comment on "specific considerations" of a sale. A spokesperson for ABN Amro said the bank would not comment on "market rumours."

The French lender, which has a market value of 58 billion euros, last year sold its Bank of the West U.S. retail banking unit for $16 billion, raising expectations that it might use the proceeds for acquisitions in Europe.

However, analysts at Keefe, Bruyette and Woods said a tie-up with ABN Amro, which had a net profit of 1.2 billion euros in 2021 and is almost entirely focused on retail and corporate clients in the Netherlands, would make little sense for BNP.

"If this deal were to happen, then BNPP would have essentially swapped Bancwest for a mixture of Dutch retail banking with few synergies and prime brokerage balance sheet," they said in a report.

They noted that BNP Paribas had benefited from recent regulatory changes to the capital requirements of the euro zone's biggest lenders based on their exposure to the single-currency bloc.

"Using the proceeds to add more low-risk assets seem to us a poor use for that firepower," the report said.

Any such deal would also likely be a tough sell politically in the Netherlands, where memories are still fresh of the 2007 carve-up of ABN AMRO after a 71 billion euro hostile acquisition by RBS (LON:NWG), Santander (BME:SAN) and Fortis.

The Dutch state had to intervene in 2008 to rescue the Dutch operations of both ABN Amro and Fortis to avoid a crippling bankruptcy, with taxpayers footing the bill of around 24 billion euros.

"We believe the government would rather ABN remain Dutch, particularly given the efforts and cost involved in rebuilding the bank," the Keefe, Bruyette and Woods analysts said, noting an unsolicited approach by Nordea had been rejected in 2016.

Since its bailout by the Dutch state, ABN has refocused its operations to the Dutch market, cutting thousands of jobs. Last year it ended all its international trade and commodity financing operations after a string of losses.

It was in part re-privatised in 2015. The Dutch state still owns 56% of the shares and has said it intends to gradually reduce its holdings. It has not sold any shares since September 2017.

($1 = 0.9519 euros)