Dutch state invests euros 750 mn in SNS bank

AMSTERDAM/Netherlands: SNS Reaal NV, a Dutch financial services company, said Thursday it will receive a 750 million euro ($934 million) lifeline from the government to shore up its capital position amid the financial crisis.

SNS will be the third Dutch company to take government money in a month, following the larger ING Groep NV and Aegon NV.

SNS said terms are similar to the previous deals: it will issue new shares to the state, paying 8.5 percent interest, and has an option to repurchase them at 150 percent of the issue price.

In addition, the Utrecht-based company will issue 500 million euros ($622 million) worth of new shares to a major investor: the Stichting Beheer SNS Reaal, a foundation that exists solely to protect the company's interests. The combined cash injection of 1.25 billion euros ($1.56 billion) is almost as large as SNS's entire market capitalization of 1.3 billion euros ($1.62 billion) as of Wednesday's close.

Chief Executive Sjoerd van Keulen said in a statement that the company ``is focusing first and foremost on reinforcing its solvency and liquidity position.'' Separately, the bank posted a third quarter loss of 88 million euros ($110 million), down from a profit of 138 million euros a year ago. The company canceled dividends and executive bonuses for the rest of the year.

Its stock fell 4.4 percent to 4.78 ($5.96) euros in early trading and is now down 69 percent since January.
SNS said its Tier 1 capital ratio _ the most commonly used measure of a bank's financial health _ will be 10 percent after the deals, without specifying what the ratio was before the capital injections.

The bank said it did not lose retail customers during the quarter but in fact won market share. In addition to bailing out ING and Aegon, the government nationalized the Dutch operations of ABN Amro, the country's largest retail bank, along with those of Belgium's Fortis in early October. SNS's bailout is the fifth government rescue.