ABN M&A redux would oddly make sense

ABN Amro Bank NV

23/09/2025 11:54

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Liam  Proud

LONDON, Sept 23 (Reuters Breakingviews) - The 2007 feeding frenzy over ABN Amro ABNd.AS has become a symbol of pre-2007 irrational exuberance. Some members of the winning consortium - which included Royal Bank of Scotland, Spain's Banco Santander SAN.MC and Belgian-Dutch group Fortis - needed a bailout barely a year after clinching the 71-billion-euro deal. In 2025 Europe's cleaned-up banking system could converge on the Dutch lender once again, but the endgame looks more palatable.

Admittedly, nothing seems imminent. Bloomberg reported late on Monday that Belgium's 39-billion-euro KBC KBC.BR was exploring a move for ABN. In response, the Brussels-based lender said it was continuously monitoring the market for opportunities but only currently studying a move for local insurer Ethias. ABN's shares initially popped, but as of Tuesday morning were trading just 4% above Friday's closing price.

Still, a renewed bidding war is distinctly possible. Start with ABN itself. Its key government shareholder, whose stake dates back to a 2008 bailout, recently cut its position to around 20% against roughly 40% last October. That opens the window for a possible acquirer, even though Dutch political dysfunction may gum up the process.

The bigger point is that ABN's standalone story is hardly alluring. New boss Marguerite Bérard will lay out her plans in November, but it's unclear how she'll radically reshape a mid-sized bank that trades at a lower multiple of tangible book value than most big regional peers. ABN will struggle to earn a 10% return on tangible equity in the coming years, based on analyst forecasts gathered by Visible Alpha - unusually low in European banking these days. If someone came along offering an M&A premium of 20% or more, therefore, it might be hard for the board to resist.

The returns for possible bidders seem palatable. Assume a 20% acquisition premium to Friday's undisturbed level, implying a 26-billion-euro takeover price. ABN's 2.6 billion euros of 2028 earnings alone would be enough to deliver the buyer a 10% return on investment, according to Breakingviews calculations based on forecasts gathered by Visible Alpha. That may appeal to big beasts like Nordea Bank NDAFI.HE or Deutsche Bank DBKGn.DE, who may not want to miss out on a new round of cross-border consolidation.

A bidder with some geographic overlap, and therefore the chance to extract some more cuts, could do better still. France's BNP Paribas BNPP.PA may fall into that category, given its Dutch presence. Another wildcard is local cooperative bank Rabobank, which seems to have oodles of excess capital given its recently reported common equity Tier 1 ratio of roughly 20%. The difference between that and its 14% target is about 14 billion euros, according to Breakingviews calculations.

Re-run the return on investment calculation and assume, say, cost cuts equivalent to 20% of ABN's total expenses, implying annual savings of 1.1 billion euros. That would bump the return up to well over 12% - easily enough to put the ghosts of 2007 to rest.

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CONTEXT NEWS

KBC said on September 22 that it was only exploring an acquisition of insurer Ethias after Bloomberg reported that the Belgian lender was mulling a deal for Dutch rival ABN Amro.

"We are continuously monitoring the market to identify opportunities that strengthen our unique digital-first bank-insurance group," Reuters reported citing an emailed statement from a KBC spokesperson.

"Currently, we are only studying a potential acquisition of the state-backed Belgian insurance company, Ethias NV," the spokesperson added, according to the Reuters report.

ABN Amro is below-average for both valuation and future returns https://www.reuters.com/graphics/BRV-BRV/klpybrjbgvg/chart.png

(Editing by George Hay; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on PROUD/liam.proud@thomsonreuters.com))