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Profitability of Dutch banks will be moderate in coming years and may only return to historically normal levels by 2012, the Dutch Central Bank said Wednesday.

The central bank, known as the DNB, said in a report that profitability of Dutch banks decreased in the second quarter after an improved performance in the previous one, mainly due to higher costs and bad-loan provisions. It said that, based on its own calculations, banks' profitability may return to historical normal levels by 2012, with a return on assets of roughly 0.6%. In 2009, the Netherlands' banks recorded a negative return on assets.

The DNB noted that Dutch banks' access to capital market-funding has improved, and that none of them have raised money through government-backed loans in the first half of this year. The banks are also tapping lower amounts from the euro zone's lender of last resort, the European Central Bank. At the end of the second-quarter, Dutch banks loaned a total of EUR71 billion, from EUR150 billion at the height of the financial crisis, the DNB said.

The central bank said that Dutch banks should attract more long-term funding, for example on the securitization market, and that they should try to attract more retail funding to become less dependent on the volatile capital markets.

The Dutch banking sector was one of the hardest-hit by the global credit crunch, and the Dutch government had to step in several times for rescue. The crisis led to the nationalization of the Dutch parts of former financial-services giant Fortis Holding, which are currently being merged to form ABN Amro Bank NV. It also led to multi-billion rescue operations for ING Groep NV (INGA.AE) and SNS Reaal NV (SR.AE).

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

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