NETHERLANDS - The unlisted Dutch business bank NIBC saw its profits drop in the first half year of 2008 drop by a further 17% to €110m, ascribing the continuous drop to 'challenging' market circumstances.

The bank, announcing its half year results today, particularly saw its investment banking activities hit, while its investment management division - responsible for developing asset management activities for its credit fixed income, private equity, mezzanine, real estate and infrastructure funds - saw profits drop to €2m.

The operating income of the investment management divisionwas down 21% to €14m but the bank now wants to strengthen this business as part of a new "two-pillar strategy" sharpened around merchant banking and specialised finance.

NIBC was previously owned by the two giant Dutch pension funds ABP and PGGM (now called PFZW) but sold to American JC Flowers in 2005, and now states it has lost €244m in the first quarter following €293m in write-downs on its portfolio with American shopping centres as collateral.

The bank thinks, however , it has been able to get rid of its most problematic subprime-related investments, after it lost $139m on American mortgage-backed securities.

The news comes after an already tumultuous year for NIBC, which last year was among the first financial institutions to reveal losses incurred as a result of exposure to the US housing market.

On the back of this loss, the net profit attributable to parent shareholders of NIBC Bank for 2007 dropped by 60%, to €98m, the bank said in February.

Amid the problems, the bank appointed Jeroen Drost, previously chief executive of the Asian operation for the recently sold ABN Amro Bank, to replace Michael Enthoven, as chief executive officer.

Enthoven announced his resignation in January, alongside his chief risk officer Jurgen Stegemann, after major Icelandic bank Kaupthing revealed it would not proceed with its €3bn acquisition of NIBC.

Kaupthing said at the time "due to the current instability in the financial markets", it had decided not to pursue the deal with NIBC's owner, US buyout firm JC Flowers, and the move prompted Enthoven and Stegeman to resign.

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