NETHERLANDS - Dutch merchant bank NIBC has seen profits evaporate because of massive losses on asset-backed securities related to the US subprime mortgage market, despite nearly doubling its institutional assets under management earlier this year.
Providing today's preliminary results ahead of the August 15 earnings results, NIBC said it made a net profit of just €3m in the first half of 2007, disclosing €137m of losses on US asset-backed securities in the first half of 2007.
The two major Dutch pension funds ABP and PGGM sold NIBC two years ago to the eponymous firm run by former Goldman Sachs partner, Christopher Flowers, following which the company planned an initial public offering (IPO).
NIBC postponed its IPO in March (see earlier IPE story: NIBC pulls flotation in rough markets) because of volatile market conditions and said today it has indefinitely shelved the plans.
Spokeswoman Ingeborg Klunder also told IPE today the bank expects further losses from its asset-backed securities holdings, adding the bank will further divest from asset-backed securities.
Standard & Poor's Ratings Services put NIBC's 'A-' long-term counterparty-credit rating on negative credit watch. According to Klunder, this is a "very disappointing" decision.
Blaming the investment loss on asset-backed securities on "severe instability in the US credit fixed income markets and continuous credit spread widening", Klunder said NIBC's other business units show healthy growth.
Klunder could not reveal possible institutional outflows ahead of the official earnings announcement, but said she had yet to hear of any negative feedback from investors.