DBRS Takes Various Actions on ABN AMRO

DBRS has today taken various actions on the issuer ratings and specific debt instruments of ABN AMRO Holding N.V. (ABN AMRO) and its consolidated subsidiaries that are fully owned by RFS Holdings B.V. which is controlled by the Royal Bank of Scotland Group plc (RBS).

DBRS has today downgraded the Long Term Debt and Deposit ratings of ABN AMRO Bank N.V. (ABN AMRO Bank) from AA to A (high) and the Long-Term Debt rating of ABN AMRO has been downgraded from AA to A. The Short-Term Debt of ABN AMRO Bank has been downgraded from R-1 (high) to R-1 (middle). This action aligns these ratings with DBRS’s ratings of the Royal Bank of Scotland plc and RBS. The trend on these ratings is Stable. The Stable trend reflects RBS’s status as a CIB in the U.K. This rating action follows DBRS’s downgrade of RBS and reflects the ownership structure for ABN AMRO, which remains a part of RBS. All of ABN AMRO’s senior unsecured debt, except for the ABN AMRO Bank bonds listed at the end of this release, has been economically allocated to RBS acquired businesses.

Concurrently, ABN AMRO Bank’s outstanding trust preferred securities have been downgraded from BBB to BB. The trend on these securities is Negative. Considering the significant cyclical and company-specific headwinds that RBS faces, DBRS sees an elevated risk of nonpayment of preferred dividends (which DBRS defines as a default on these instruments) which would likely entail a nonpayment of dividends on these securities.

At the same time, DBRS has today placed the ratings of those ABN AMRO Bank debt securities that are currently economically allocated to Dutch State acquired businesses under review with Positive Implications. The table at the end of this release provides a preliminary list of these instruments. The current ratings and the review placement reflects DBRS’s opinion that the Dutch government will appropriately support this debt as part of its acquisition of these businesses from ABN AMRO Bank. The government intends to combine these operations with Fortis Bank Nederland to create a new ABN AMRO banking operation. Uncertainties remain as to the timing of any asset/liability transfers and the final form of the new entity.

The placement of the ratings Under Review with Positive Implications reflects DBRS’s view that the reconstituted ABN AMRO banking entity is likely to have a solid franchise in the Netherlands. Accordingly, the ratings of this new entity and the transferred debt could be rated the same as or higher than the current ratings. The addition of Fortis’s Dutch banking operations in the new banking entity will, in DBRS’s view, strengthen what is already a strong player in the Dutch financial services industry. The combined operations would have a top three market position in most retail and SME banking businesses and operate approximately 800 branches in the Netherlands. Importantly, the Dutch State acquired businesses remained profitable in 2008, despite the challenging economic environment. Furthermore, state ownership, though temporary, is a key factor supporting the new ABN AMRO banking entity and the key role that it is likely to play in the Dutch economy, which significantly reduces the likelihood of lowering the ratings on these instruments. The Dutch State anticipates retaining a stake in the new ABN AMRO banking entity until at least 2011.

DBRS expects to conclude its review when more detailed information becomes available about the specific debt to be transferred, asset mix, funding profile, capitalization and strategic direction of the new banking entity.

Notes:
All figures are in EUR unless otherwise noted.

The applicable methodologies are Analytical Background and Methodology for European Bank Ratings, Second Edition and Enhanced Methodology for Bank Ratings, which can be found on our website under Methodologies.

This is a Corporate (Financial Institutions) rating.