Dutch bank ABN Amro faces further political hurdles before IPO

By Toby Sterling

AMSTERDAM (Reuters) - ABN Amro's [ABRGPA.UL] expected re-privatisation has become mired in a political debate over pay and ethics at the Dutch bank, threatening to delay what would be the Netherlands' largest share listing in at least a decade.

But barring a severe market downturn, bankers and government officials say a market flotation towards the end of this year is still the most likely outcome for the bank, which was rescued by the Dutch government in 2008.

"Despite the suggestion from some quarters that ABN Amro should remain a state bank, there is enormous pressure for it to be privatised," said Jaap Koelewijn, a professor of corporate finance at Nyenrode Business University.

As long as the government owns the bank it is "going to prove a political liability again and again," he added.

ABN Amro was nationalised during the financial crisis, in a rescue that cost taxpayers 24 billion euros (17.5 billion pounds), a sum unlikely to be recovered given its current book value of 14.9 billion euros.

But until a row broke out last week over a proposed salary hike for the company's executive board, Finance Minister Jeroen Dijsselbloem had been expected to recommend that it be re-privatised after parliament's summer recess.

On Friday he delayed that decision until questions from parliament about the 100,000-euro pay increase for most members of ABN's management board were answered.

After the bank's executives voluntarily agreed to forego the raise on Sunday, Dijsselbloem said an IPO was back on the cards.

Finance Ministry spokeswoman Geertje Janssen said on Monday the minister now hopes to answer questions from parliament as quickly as possible, perhaps this week.

"The Cabinet has said it does not intend to be the long-term owner of ABN Amro and it will be returned to private hands as soon as it is ready and the market is favourable," she said.

But the process will take longer and be more difficult than most anticipated. It now faces one round of debate over pay and other recent controversies, and then a second to approve the listing.

Lawmakers have lodged questions not only about executive pay but also about management issues after ABN Amro said it had recently dismissed several employees for failing to follow internal guidelines.

The bank received further unwanted attention on Saturday when daily newspaper Het Financieele Dagblad said that the Dutch central bank had accused ABN Amro of insufficient vetting of oil trading firm Gunvor, which was part-owned by Russian businessman Gennady Timchenko until March last year.

Gunvor responded that all its activities were "in line with international standards for financial crime risk."

ABN Amro said "our own compliance investigation has not brought to light anything to contradict this."

Everything is ready for the government to pull the trigger on the IPO and the procedures are seen as delaying, not blocking, the eventual stock market listing.

Parties on the right of the political spectrum support the bank's privatisation, as does Dijsselbloem's centre-left Labour party, the junior coalition partner.

A Dutch banking industry source, speaking on condition of anonymity because all the major banks in the Netherlands are competing to participate in ABN's eventual listing, said he sees one more political contretemps lying ahead.

He predicted a major foreign bank will end up winning the role as global coordinator for the share sale and the fees will then be considered exorbitant by Dutch standards.

"You can see what will happen when politicians realise the fees that are going to be paid to bankers," he said.

But he said that he didn't think the controversy would seriously harm investor interest.

ABN Amro spokesman Hans van Zon said again on Monday that the bank's view is that it is ready for a stock market listing, whenever the government decides.

"The timing is completely in the minister's hands," he said.

(Editing by Alexander Smith and Greg Mahlich)