ABN AMRO’s DIRECT custody, securities clearing and fund services businesses in selected European and Asian markets are to be purchased by Citigroup. Upon completion, these ABN AMRO businesses will join the Global Transaction Services unit (GTS) in Citigroup’s Global Corporate and Investment Banking Group.
GTS says that it expects to broaden its product capabilities and client growth opportunities through the acquisition. The transaction includes ABN AMRO’s domestic custody business in the Netherlands and its network domestic custody business in Russia, Greece, India, Indonesia, South Korea, Poland and Taiwan, servicing approximately 550 financial institution and corporate accounts. The transaction should add in the order of $240bn of assets under custody to GTS’s $7300bn custody portfolio.
The transaction is expected to close within the next three months, subject to customary regulatory approvals in applicable markets.
Giulio DiCerbo, managing director, GTS at Citigroup, said that the acquisition is tied to an ongoing strategy to enter Euronext markets: “We will be able to better service some of the fund business. We know [ABN AMRO] have excellent capabilities there. It increases the functions on the fund services side, which is a very important business, particularly here in Holland.“
He continued: “The Netherlands is part of the Euronext market, and we will definitely become one of the biggest players in the Netherlands through this acquisition. That would give us a tremendous leg-up with regards to share of business in the Euronext environment. Hopefully we will be able to leverage off of that to get incremental business, not only in the Netherlands but also in the other markets that are part of Euronext.”
ABN AMRO notes that the sale is a straightforward part of its strategy to allocate resources in its wholesale clients strategic business unit to core businesses fully aligned with its client-led model.
The acquisition trend is expected to continue within the industry. Mr DiCerbo notes that, for banks: “It’s a question of make it or buy it. Who do I join forces with? Or do I get out of the business? Do I grow? But if you’re small, to grow and become international is a hefty investment.”
Citigroup says that it will, over time, combine ABN AMRO’s domestic custody operations with its current GTS operations and that ABN AMRO operational and servicing staff and management will become members of the Citigroup organisation. For the moment, they will continue to use the ABN AMRO technology, but Mr DiCerbo says: “The goal is clearly to put it on our platform going forward.”
