Dutch bank ABN AMRO will consider acquisitions as part of “modest” growth plans after making good progress with its turnaround and offloading unwanted assets in its investment bank quicker than expected, its chief executive told IFR.
This is a significant recent shift for a bank that has been slimming down for the past year, but it is maybe no surprise given ABN's long list of mergers and acquisitions in its 300-year history. Indeed, it was at the centre of what is widely regarded as the worst takeover in banking history, when three banks teamed up to buy it and break it up in 2008. ABN is still 56% owned by the state after the Dutch rump of the bank had to be bailed out.
“We’ll always look at M&A when and if the opportunity arises,” said CEO Robert Swaak. “I would always look at opportunities ... but M&A will have to be accretive to the business.”
Analysts say private banking is the most likely area ABN could target for a bolt-on acquisition, but Swaak said his radar would be on all relevant areas in its chosen segments and geographic regions.
Swaak took over as CEO in April 2020 and set out a new strategy seven months later, which included shrinking its investment bank to focus on north-west Europe and specific areas of strength and scale. It also chose to keep a global clearing operation, where it is one of the leading banks.
The plan included quitting trade and commodity finance activities and corporate banking in the United States, Asia, Australia and Brazil. It set up a non-core unit to run down about €18bn of loans, or about 35% of CIB's total at the time.
ABN expected the run-down to take three years, but Swaak said 80% had been done in the first year, leaving only “the tail-end of the book”. It accelerated with the sale of some loan books, including US$700m of shipping loans in the US sold to Credit Agricole in July at near book value, and has been aided by favourable market conditions, including decent commodities prices.
“We’ve done quite a bit in a short space of time to reposition the bank,” Swaak told IFR.
Wanted: local bank
The quicker and capital-accretive rundown will help ABN look at growth options in the areas it has focused on, which include targeting entrepreneurs and their associated companies, in tandem with its private banking arm.
In corporate banking, which includes the investment bank, that includes products for mid-sized and large companies in the Netherlands, Belgium, Germany, France and the UK, including clearing, debt and equity capital markets, private equity, asset-backed finance and structured finance. Sectors it is particularly targeting include financial institutions, natural resources, transportation and logistics.
“Whoever we talk to, whether it’s mid-sized corporates or large corporates, they always tell us that in spite of the significant pressure we see from US investment banks in Europe, there’s always a need for a local-domiciled bank,” Swaak said.
Windfarms and social bonds
ABN also sees itself as a leader in sustainable banking and servicing clients with their carbon transition needs. Swaak said that is rooted in the bank’s history – it was one of the first banks active in ESG, and issued (and structured) a green bond offering in 2015, the first Dutch bank to do so.
The bank aims to increase the volume of sustainable client loans and investments to about one-third in 2024 from one-fifth last year.
It is a big player in advising, financing and investing in windfarms and other renewables, for example, and was also joint lead manager for Yorkshire Building Society on a £250m social bond issue in July, which was the first senior social bond offering from a UK building society.
Swaak said the increased competition among banks for sustainable finance advisory and products was not a problem.
“I welcome that all financial institutions are now engaging on ESG. We shouldn’t be competing with each other for the future of the earth. How we do it – we can leave to each institution,” he said.