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S&P Says Dutch Banks Can Deal With Weak Economy

04/05/2012 | 07:09am US/Eastern

Standard & Poor's Ratings Services said Thursday that Dutch banks are in a good position to deal with the country's economic downturn despite fierce competition and higher provisions for bad loans.

S&P said the slowdown will dampen business activity and put pressure domestic borrowers. As a result, banks will face a slight increase in domestic loan losses and continued fierce competition.

"[This] will likely restrict banks' margins, adding to the strain on their bottom lines," the credit rating firm said in a report on banks in the Netherlands.

The Dutch economy fell back into recession in the fourth quarter and is expected to shrink further this year due to a slump in the housing market and sluggish exports. Dutch banks have said they expect 2012 to be a difficult year.

Dutch banks were hit hard during the 2008 financial crisis, with many needing government support to stay afloat. But they are now considered some of the healthiest lenders in the euro zone, having reduced their balance sheets and strengthened their capital buffers.

The biggest players--ING Groep NV (>> ING GROEP), Rabobank Groep, and state-owned ABN Amro Bank NV--already meet stricter European banking rules that will take effect later this year. Unlike many lenders in the euro zone, they didn't need to tap the European Central Bank for cheap loans.

"Many Dutch banks entered this latest period of sluggish economic growth on a sound footing," S&P said, adding that it expects them to continue to put balance-sheet strength before near-term profitability. "Consequently, we believe Dutch banks should still be able to maintain generally stable credit profiles this year."

- By Maarten van Tartwijk; Dow Jones Newswires; +31 20 571 5201; maarten.vantartwijk@dowjones.com

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