SNS Reaal (SNREF.PK) is a company operating in Insurance, Banking and Property. The company is listed at the AMX (AEX MidCap). The stock has lost a lot of its value over the years and is on the brink of becoming a penny stock. They had to do a lot of depreciation on their property division which brought them in trouble. The Bank will fall unless the Dutch government will support them and give the company a capital injection. Most investors are worried it will fall. I will give my reasons why it will not fall and how you (as an investor) can profit from it.
SNS Reaal is one of the four system banks in the Netherlands and therefore it may not fall or go bankrupt. In case of bankruptcy the Dutch government has to step in and nationalize the bank and sell the good subsidiaries. This operation will cost the government billions of euros and can be prevented with a capital injection. De Nederlandsche Bank (The Dutch Federal Reserve) made a statement to SNS Reaal where it has promised to come with a solution before mid February. Mid February does not come as a surprise because the annual report will be presented (intern) during that period. The statement was not made public and sources within SNS Reaal have said this. It’s still trustworthy though because SNS Reaal had talks with the Dutch Ministry of Finance about selling the property division and their problems with their equity.
The company is in a really bad shape (al because of the property division). The company has billions of euros in commercial property. Even if the company sells all their good subsidiaries they will still have a negative equity. It can be described as a huge elephant that does not fit though the door and has to be cut in pieces to get though. It has depreciated 1,1 billion euros over the last 3 years on the property division. The company already had a financial injection during the crisis and still has to redeem most of it. The other subsidiaries and their core activities are all healthy and are recovering well from the crisis. They only have to get rid of the Property finance division.
Now comes the part where you can make money from all of this. First of all forget about the stock it’s dangerous to invest in and it is unpredictable. On the other hand you can make a lot of money on their corporate bond. I’m talking about the 11.25% SNS Bank Perpetual 2009 (NSCNL0SNSTR1), now at 71% (and gaining daily) of its payout it can make you a lot of money if the Dutch government is going to inject capital into the Bank. That will mean that the bank will not fall and that all bond holders would get their money almost 100% guaranteed. This means that it would jump near the 100% and add the 11,25% interest on top of that and it will make you a wealthier person.(click to enlarge) Volume is really picking up after the news came out (1 month chart)