Winners' Curse

When the trio of RBS, Fortis and Santander won the US70 billion breakup of ABN Amro last year (during a period where almost every bank was getting pissed drunk on leverage), few would have envisioned the state they have ended up in now.

RBS suffered an almost 65% drop in its share price since the announcement of their take over of ABN investment banking services, on fears that the bank would have to find it increasingly difficult to boost its capital reserve ratio.

Fortis, a European banking and insurance giant had to be bailed out by the governments of the Netherlands, Belgium and Luxembourg. And worst still, as part of the plan, Fortis would have to sell off their stake in ABN Amro, most likely at a third of the price they had originally paid.

Only Santander remained in the clear, having sold part of their stake in ABN at a profit of USD 1 billion and keeping the South American operations. Currently, they are buying up assets on the cheap in UK - Abbey, A&L and B&B.

Indeed, a victorious bid in an auction may be great for the ego, but winners beware, the curse can be deadly.