Robert Swaak

Sustainability and a client-centric focus are key areas for CEO Robert Swaak as he continues to push ABN Amro into a new phase. Edward Russell-Walling reports.

There is a sense that a corner has been turned at ABN Amro, as its management continues to overhaul the business, making it more sustainable and client-centric. The Dutch bank’s latest quarterly profits were ahead of expectations, along with its asset disposal programme, and it is now discussing share buybacks with its regulator.

ABN Amro was famously the subject of the largest, and arguably worst-timed, takeover in banking history when it was acquired and carved up by the Royal Bank of Scotland (RBS), Fortis and Santander in 2007. Almost immediately, the financial crisis erupted, devastating RBS and Fortis. When the dust had settled, the Dutch remnants of ABN Amro had been bought by the Dutch state, which still has a 56% stake.

Orderly return to profitability

Fast forward to 2020, and the appointment of Robert Swaak as CEO, following a period of disappointing results with large — and uncomfortably public — loan losses. A review of the corporate and investment banking (CIB) business had already been announced and Mr Swaak, a former global vice-chairman of PwC, ordered its completion as soon as possible.

The review looked at all the bank’s international activities through a prism of scale and profitability. “[Trade and commodity finance] global and oil and gas ex-Europe were not sufficiently profitable,” Mr Swaak says, adding that they also raised issues of scale. “We concluded that we should wind them down, with the loss of 800 jobs.”

In August 2020, the bank identified some €18bn of CIB loans as non-core, to be run down over the next three years. Little more than a year later, 85% of this loan book has already been disposed of, helped by favourable commodity prices.

Mr Swaak insists that the run-off has been orderly — the most important word in any wind-down, he says — and that the bank has held onto the expertise required to manage retention risk. “If the price has not been right, we have taken our time, so it has been very orderly,” he says.

Strategic positioning

The review was accompanied by a restatement of ABN Amro’s overall strategy and scope. “We needed a clear view of the future bank,” Mr Swaak says. “We have chosen to focus on north-west Europe, where we have a rich history and heritage. It’s where we have known our clients for a long time and have a proven track record.”

Within that geography, the bank concentrates on segments it believes it can build on. Chief among them are mortgages and small and medium-sized enterprises, which are “the heart of ABN Amro”, Mr Swaak notes. Private banking, where the bank is Dutch market leader with a significant presence in Germany, France and Belgium, is also “a priority”.

We have chosen to focus on north-west Europe, where we have a rich history and heritage. It’s where we have known our clients for a long time and have a proven track record

Corporate banking in north-west Europe, including the UK, remains a focus in “apposite” sectors such as financial institutions, commercial real estate, digital and energy. The bank has kept its global clearing operations, as a key player across the Americas, Europe and Asia, and continues to serve the shipping sector, with hubs in Athens and Norway.

For corporates in north-west Europe, it will continue to provide investment banking products and services, including debt and equity capital markets, asset-backed and structured finance and private equity.

Client-centric focus 

Until the end of November 2021, ABN Amro was organised under the four business lines of retail, commercial, private and corporate banking. These have since been replaced by three more client-centric units — personal and business banking, wealth management and corporate banking.

“The client is not concerned with different business lines,” Mr Swaak explains. He refers approvingly to what he calls the entrepreneur–enterprise concept, and says that the bank would like to serve both the company and its owner at the same time.

ABN Amro now markets itself as “a personal bank in the digital age”, with three strategic pillars: customer experience, sustainability and future-proofing the bank.

Sustainability becomes a major motif, built around the three themes of climate change, the circular economy and social impact. The bank currently has €39bn of sustainable assets and aims to grow that to €46bn by 2025.

It was the first bank in the Netherlands to issue a green bond, back in 2015. This was an upsized €500m five-year transaction, and was the first in the eurozone to be certified under the Climate Bonds Standard.

Today, to mitigate climate change and back the energy transition, the bank will support its clients with loans and advice in making their real estate more sustainable. It recently introduced a sustainability discount of 0.10–0.15% on mortgage interest payments for customers whose residential or commercial property meets certain energy measures.

It is refurbishing its own property portfolio to comply with the same standards. Advisory functions around the bank include a service for farmers who want to make their business models more sustainable.

ABN Amro sees itself as a pioneer in the circular economy and will both advise and support companies that wish to switch to this business model. Its social impact activities are built around financial resilience, financial inclusion and equal opportunities for the vulnerable.

Smaller, safer and simpler

If ABN Amro’s aim is to be a smaller, safer and simpler bank, its returns targets bear this out. Return on equity is envisaged to be 8% by the end of 2024, down from an earlier target of 10%. Mr Swaak attributes the reduction, at least in part, to an anticipated lower-for-longer interest rate environment that, he says, is not conducive to higher returns.

From a credit rating perspective, ABN Amro is one of the best bets in banking Europe, with ratings of A (S&P and Fitch) and A1 (Moody’s). The most recent rating action was from Fitch in November, when it confirmed its long-term issuer default rating at A and revised its outlook from negative to stable.

Announcing its third–quarter 2021 results, the bank disclosed a strong capital position, with a Basel III common equity Tier 1 (CET1) ratio of 17.8% and Basel IV CET1 of around 16%. It also said it was having a “constructive” dialogue with the Dutch central bank on potential share buybacks.

Quarterly net income rose to €343m, up 14% from a year earlier and well ahead of the €261m consensus forecast reported by Bloomberg. The numbers were helped by the release of €12m in provisions for doubtful loans, compared with provisions of €270m taken on a year earlier.

The bank said that demand for lending was showing signs of recovery, that corporate and mortgage loan books had grown during the quarter, and that it expected impairments for the full year to be “around nil”.

Return on equity in the quarter was 6.5%, or 7.8% excluding the CIB non-core loans. The bank reported strong fee income growth of 19%, excluding non-core, but noted that deposit margin pressure persisted.

For the past two years, ABN Amro has been charging negative interest rates for deposits above a certain threshold. This reflects the negative rates the bank itself pays for the percentage of savings it must park with the European Central Bank (ECB). That threshold has been steadily coming down, from an initial level of €2.5m. From January 2022, depositors must pay 0.5% on any savings over €100,000.

The ECB, which had prevented eurozone banks from paying dividends or buying back their own shares during the Covid-19 pandemic, relaxed this restriction from September 2021. ABN Amro has now paid shareholders their dividend for 2019.

However, plans to reduce state ownership of the bank may remain on ice for a while, as the new Dutch coalition government gets its feet under the cabinet table. Observers say that while the previous government was in favour of selling down its stake further, the issue is nowhere near the top of the incumbent’s agenda.

Mr Swaak is carefully optimistic about the future, pointing to modest growth in corporate banking in the north-west European environment. “We foresee growth particularly in sectors where we have a lot of expertise, such as energy and mobility,” he says, adding that sustainable bonds and loans should also grow.

As the bank feels steadier on its feet, mergers and acquisitions (M&A) are again on the menu. While private banking seems an obvious area for growth by acquisition, Mr Swaak says that target segments need not be confined to existing business units.

“As long as it is value-accretive, we will always look at an opportunity,” he says. “We have been very clear about our value segments and geographical footprint, so any M&A would have to prove itself in terms of one or the other.”


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