Could ABN Amro Slip Back into Securitization

Rising like a phoenix out of the ashes of the credit market’s 2008 collapse, word comes out of the Netherlands this week that ABN Amro may be getting off the mat for another strong run at the capital markets.  Could this be a precursor for other firms either assumed dead or on the respirator such as Royal Bank of Scotland or AIG (all beneficiaries of unprecedented national government assistance)  adding some competition and some spice to a revival of global structured finance?

You will recall that following the disastrous three-way breakup of ABN by RBS, Fortis and Banco Santander in 2007, the remnants of ABN’s business were rescued by the Dutch Government in 2008 via a Euro24 Billion infusion and the nationalization of the company.

Now comes word that the Dutch Government is hopeful that they will be able to recoup all or more than their investment through an IPO process of a resurrected ABN Amro, as early as 2014.

Chief cheerleader for the revived ABN is their new CEO, Gerrit Zalm, who was interviewed by the Financial Times earlier this week.  Zalm made a number of interesting comments about expansion plans for ABN in several product areas including, commercial, merchant and private banking business lines.

One comment that we found to be particularly interesting was Zalm’s indication that the bank is interested in buying up assets of “capital-stretched” banks in the Euro-zone and taking over the management of portfolios.  Could this mean what we think it does?

Does ABN expect to look for buying opportunities for distressed portfolios?  Certainly on paper, their clean balance sheet (all within the new ratio guidelines) make them a natural buyer, as they do have capacity.  What does one expect they will do with those portfolios?  Certainly they might sell them to their bank customers but we think it is much more likely that they will re-package those assets and sell them to institutional investors in the secondary market.

We’re not suggesting that ABN and others might light the match to ignite the return of a CDO market.  However, we don’t think it would be stretch to see ABN provide the market with a very valuable valve to release pressure in the credit markets and to help to once again align the distribution of structured product with investor demand; something which the so-called “healthy” banks have limited capacity for at the current time.

Talk about “weird justice”.  We may very well witness some of the baddest cowboys on the ranch donning white hats and riding to the rescue of the securitization markets.  Wouldn’t that be ironic!

About markferraris
Managing Principal Orchard Street Partners LLC

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