Wholesale banking: ABN Amro cuts now, but ING is next
Exits at ABN Amro, including its big operation in commodity trade finance, raise questions about ING, as both firms enjoy much better returns in Dutch retail lending.
Think of a European bank that needs to shrink its corporate and investment bank.
Deutsche Bank or Societe Generale probably come to mind, but ABN Amro’s decision to run down all corporate banking outside Europe – and exit commodity trade finance completely – is a timely reminder of the next layer down.
Below the likes of Deutsche and SocGen, European wholesale banks’ competitive advantages are even less able to justify their costs after Covid-19 and as Basel reforms suck up more capital.
All the big Dutch banks fit in this next tier down, because their domestic market is so small. They maintain full-service investment banks.
But to a greater degree than the French, they are struggling to fight back against the US firms, even in their home market. Increasingly, they won’t have the client flows to justify expensive capital-markets capabilities.
ABN Amro’s recent cuts, which will see its wholesale-banking exposures fall by a third, then raise the question of what might happen at ING: the Netherlands’ biggest bank.