Deutsche Bank has ended talks to buy a package of assets from nationalised bank ABN Amro under a deal mandated by the European Commission.
The news throws a huge roadblock in the Dutch government's plans for ABN Amro, which it took over in October in a €16.8 billion deal.
"It really is a mess," said Paul Beijsens, an analyst at Theodoor Gilissen.
It is also the latest sign that Brussels is intervening heavily in deals involving banks that have taken state aid, and is taking a harder stance.
The European Commission this week extended a review into a guarantee for ING and is threatening to break up Britain's Lloyds Banking Group and force asset sales and limit dominant market positions at Royal Bank of Scotland and other European lenders who took help.
When a group including Fortis struck a deal to buy ABN Amro Group and carve it up in 2007, the EU ordered Fortis to sell a bundle of Dutch ABN Amro assets to address competition concerns. The bundle included commercial bank HBU, 13 advisory branches and two corporate client units.
Fortis struck a deal in 2008 to sell those assets to Deutsche Bank for around €700 million. The Dutch central bank blocked the deal, though, and when the state nationalised Fortis's Dutch assets in October 2008, ABN Amro attempted to back out entirely.
It later changed that position, but a July EU deadline to complete an agreement came and went. It was subsequently extended to August and then to September, and on September 4th the finance ministry said it had asked for yet another extension.
ABN Amro and and the Dutch central bank DNB declined to comment. Deutsche Bank said it would continue to to pursue growth opportunities for its global transaction business and was committed to a leading position in the Dutch financial services market.
The Deutsche pullout comes on the same day a court ruled shareholders in Fortis could call the Dutch finance minister and prime minister to testify in a suit about its nationalisation.
A source familiar with Deutsche's thinking said that while the firm had agreed to make concessions to get a deal completed, negotiations ultimately came to a point where its costs would have risen too much to make a deal worthwhile.
A finance ministry spokeswoman told Reuters it could sell other ABN assets and could seek other buyers to try and satisfy the EU's competition concerns.
The Dutch government's ultimate plan is to merge ABN Amro Bank and Fortis Bank Nederland (FBN) into a new entity and privatise it in 2011 or later.
However, the completion of the EU-mandated ABN asset sale is a precondition of that merger being allowed. Fortis Bank Nederland declined to comment.
Earlier today, an Amsterdam court gave shareholder group FortisEffect permission to call witnesses in its case against the Dutch state. The group is seeking compensation for former Fortis shareholders who lost money last year when Fortis was broken up along national lines.
With the court ruling, FortisEffect said it plans to call Dutch prime minister Jan Peter Balkenende and finance minister Wouter Bos to testify, among others.
Reuters