NL Financial Investments said SNS Bank NV is "not yet ready" to beprivatized and would need at least two to three years to achieve its desiredoperational and structural improvements.

In its advisory report published July 1, the Dutch stateholding firm said SNS Bank "needs more time to acquire a strongposition" within the country's banking sector and is "not yet readyfor an exit."

While SNS Bank's financial and operational results haveimproved since former parent SNSREAAL NV was nationalized, the bank is still confronted with anumber of operational and structural challenges driven by extremely lowinterest rates, high costs and uncertainty about the structure due to new BaselIV requirements, according to NLFI.

"The market at present is insufficiently interested in a sale of SNSBank on conditions acceptable to the state," NLFI said, adding that thelender must first execute its strategic plan over a period of two to threeyears to reduce costs and achieve "sufficient dividend yield on the basisof a balance sheet comprising safe assets and a solid liquidity and capitalstructure."

The country'sministry of finance said it subscribes to NLFI's conclusions, noting that thelender's strategic plan does not exclude any strategic options.

SNS REAAL, the former parent of SNS Bank, was in February 2013. SNS Bankwas split off fromSNS REAAL in September 2015.