Awards for Excellence 2016
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Also shortlisted: |
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Access Bank |
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Al Ahli Bank Of Kuwait |
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Asia Commercial Bank |
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BanReservas |
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Citadele Banka |
It is hard to exaggerate the extent of the tangled mess ABN Amro created after the collapse of Lehman Brothers in 2008. This was a big and complex institution, even before Fortis, RBS and Santander in 2007 agreed to buy it and tear it apart, just before the crisis hit. Then there was the bail-out, involving tens of billions of euros, multiple banks and multiple national governments.
It was many months before chairman-designate Gerrit Zalm could properly start work with a new management team and begin to build a new ABN Amro, one capable of surviving and thriving in a highly uncertain world. “It proved to be even more complex than I originally expected,” says Zalm, describing the job of remaking the bank after the crisis. “I came here at the end of 2008 and it took until April 2010, before the old ABN Amro was split up. It was an enormous IT and legal operation.”
After the division of the old bank, Fortis’ share of the old ABN Amro was to merge with the Belgian bank’s own Dutch operations (both were by then state-owned). With the integration complete in 2012, Zalm and his team had realized more than €1 billion in synergies. But the following years were hardly smooth, as the eurozone sovereign-debt crisis damaged the Dutch economy.
Considering what the bank in its various incarnations has been through, it is hard to believe that ABN Amro is one of the highest-valued banks in Europe today. It is a leader not just among Dutch banks, but it is also one of the continent’s most profitable and best capitalized. Under Zalm – formerly a long-standing and popular Dutch finance minister – ABN Amro has become, once again, a bank of which its employees and clients can be proud.
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Gerrit Zalm, ABN Amro |
“It is a bit of a miracle that we are where we are now in terms of our position in the corporate market, our capital position and return on equity; there are not so many banks who make a return on equity of 12%, especially not with such a large capital base as we have,” Zalm told Euromoney earlier this year. The lot handed to ABN Amro was certainly much better than the one RBS received after the takeover and the various nationalizations. But bringing it all together and making sure the potential was realized was by no means assured. Instead, it has been the result of steady progress towards consistent and suitably modest goals – and, above all, a lot of hard work.
For proof of the advances that ABN Amro has made since its reincarnation, investors could look no further than its 2015 capital and profitability. Tier-1 capital rose from 8.6% to 15.5%, three percentage points above its regulatory minimum. Its net profit of just under €2 billion last year was almost double the 2010 level.
ABN Amro’s IPO in November last year was a sign that the arduous task of resolving the multiple strategic and operational challenges to the separation and merger had finally paid off. It demonstrated the bank could stand on its own feet again. Indeed, by price-to-book, its shares soon surpassed its much bigger rival, ING, another of Europe’s most successful banks.
Such attractiveness to investors is in no small part due to the unglamorous task of bringing down costs: a long-standing problem even before the consortium’s takeover. Since 2010, ABN Amro has shed about 4,000 full time employees and half its retail branches; the cost-to-income ratio has fallen by around 10 percentage points.
More than that, its success is due to a targeted business approach, shunning international investment banking and instead focusing on the Netherlands, private banking and international commodities and transport. After embarking on its new strategy and financial targets three years ago, its operating income has risen from €7.04 billion to €8.5 billion, while return on equity has shot up to 12% (way beyond ING’s 10.8%), compared with just 5.5% in 2013.
ABN Amro is now the biggest lender of new mortgages in its home market and a corporate banker to around 70,000 commercial and international clients with a turnover above €1 million. It is also the third-biggest private bank in the eurozone – partly thanks to bringing back MeesPierson through the Fortis merger (MeesPierson had been part of ABN Amro before 1997).
It retains much prestige and success as an investment bank in its home market, not least after re-hiring much of its former Dutch wholesale banking team from RBS in 2012. “With all the major IPOs in the Netherlands, we had a role,” Zalm says.
In stark contrast to the old ABN Amro – with its big operations in Italy, Brazil and the US – 80% of revenues in the successor institution are in the Netherlands. “We are not the old ABN Amro that was three times as big as we are now,” says the chairman. “We limit ourselves to international activities where we have a strong capability, a strong tradition and are likely to win.”
