Bank break-ups leave Netherlands short of big names

 

The dramatic downsizing of top Dutch banks, which had proudly flown the nation's flag globally for the past two decades, has the left the Netherlands bruised and in search of a national champion.

The eurozone's 5th largest economy could be left relying on exports of machinery and iconic tulip bulbs for brand recognition across the world, though analysts say its banks will continue to be strong, if smaller, players.

The dismantling of ABN AMRO and Monday's announcement that ING will be split up diminishes two ambassadors of the Dutch economy that enjoyed far-flung reach and reputation for prudent financial management.

Both will end up being regional retail banks - with international presences, to be certain, but nothing like what they enjoyed even two years ago.

Analysts of the Dutch economy say the problems are more structural than just the recent troubles at local banks.

"The Netherlands is of course a very special country. It's very small... it did acquire in the past a type of position in international trade, international services which is much larger than you would expect from a country like this" said Harald Benink, a banking and finance professor at Tilburg University.

"What you now see with all the developments in the world, and in particular I would say globalisation of markets, it becomes harder to maintain that position primarily because of reasons of size" said Benink, who is also chairman of the European Shadow Financial Regulatory Committee.

An international consortium bought ABN in 2007 and split it up despite reluctance from the Dutch central bank (DNB), which favoured a merger between ABN and ING. A year later the deal went sour as credit markets buckled, and the Dutch government was forced to nationalise the now-smaller ABN. 

Just days after nationalising ABN, the government pumped 10 billion euros into ING. The deal kept ING's doors open, but at the eventual cost of a forced dismantling.

The blow is a hard one for a bank that shares the national colors and sponsors the national football team.

PROUD TRADING NATION

The Dutch place in the world and history of finance is a point of pride to the country. The Dutch East Indies Company (VOC) was the world's first company to issue shares in 1602.

The bailouts of the financial sector in late 2008 were a blow, and a year later, the bankruptcy of local brand DSB and carve-up of ING have made matters worse.

The Dutch economy, which depends on exports for about 70 percent of its size, is suffering the worst recession since World War II.

It is not clear what could fill the void the banking sector has left in the country's international image. A number of well-known Dutch international brands like Unilever and Royal Dutch Shell still have connections to the country, though their centres have shifted elsewhere.

"These are companies that went internationally decades ago. They have status and reputation. The focus may shift a bit more to these companies because the global banks are no longer there" said Albert Tamming, analyst at Van Lanschot Bankiers.

"In a worst case scenario knowledge and training will go elsewhere. That would hurt employment. Dutch financials had internal training that yielded globally active executives" Tamming said. 

TRANSPORT AND TULIPS

While the country may struggle to find big names, it remains a big exporter of machinery and transport material, at more than 107 billion euros (96 billion pounds) last year.

Dutch flowers - symbolised by the ubiquitous tulip - fetched the country 3.2 billion euros in 2008.

And the financial institutions are by no means finished.

Analysts noted that the role of other Dutch financial players, such as the world's third-largest pension fund ABP and unlisted Rabobank, which has a triple A-rating, would not change due the breakup of banks such as ING and ABN.

"They focus on specific segments and are likely to continue to do so. The pension sector has always been quite big. This won't change" said Dresdner VPV analyst Lester Agten.

And as for the two broken-up banks themselves, damage has been done but life goes on.

"It's of course all true, people have emotional attachment to businesses, but in reality the business of ING is not going to stop" said Robin Fransman, deputy director of industry group the Holland Financial Centre.

"There is image damage, that's obvious, but of course competition is a relative game" said Fransman, whose group aims to promote the Netherlands as an attractive financial centre.