NETHERLANDS – Standard & Poor’s has downgraded its rating on NIB Capital because it thinks the merchant bank has become less important to owners ABP and PGGM.

It added that the bank’s relationship with the two largest Dutch pension funds had not developed as expected.

The downgrade – to A+/A-1 from AA-/A-1+, with a stable outlook – follows NIB’s decision in November to hire Goldman Sachs to investigate the possibility of a stock market flotation or a merger.

NIB said it was disappointed with the decision.

The ratings firm said it has decided to “reduce its assessment of the strategic importance of NIBC to its shareholders”.

"At the same time, however, Standard & Poor's acknowledges the improvement in the bank's operating performance from its low point in 2002," said credit analyst Blanca Sagastume.

S&P said NIB has traditionally benefited from strong shareholders – with the Dutch government a majority shareholder until 1999. Since then ABP and PGGM have become 100% owners of the bank.

“However, the relationship between NIBC and ABP and PGGM has not developed in the way that was initially expected,” S&P stated.

“Specifically, in the five years since acquiring NIBC, the shareholders have not yet incorporated the bank into its own business strategy.”

S&P acknowledged the support the schemes have provided to NIB’s balance sheet. It said it believed financial support would be provided if required.

“Therefore, the current ratings still contain an element of implicit support from the shareholders, although somewhat diluted from the previous position.”

"The stable outlook is based on the continuation of the current ownership structure, and any changes could therefore have implications for the ratings on NIBC," said Sagastume.

"The stable outlook also incorporates Standard & Poor's expectations of somewhat volatile earnings given the nature of NIBC's operations," she added. "Capitalization is expected to remain strong and asset quality to remain sound".

“The managing board of NIB Capital is disappointed with this decision considering the good financial developments and strong capital structure of the bank,” NIB said.

NIB was in the news earlier this week when it said was still considering its options in the light of reported interest from Fortis.