ABN Amro is to end all trade and commodity financing after a string of losses, in a massive overhaul of its activities that will mean the Dutch bank cuts 800 jobs.
Shares in ABN, which had lost almost half their value this year, were up 6.8 per cent earlier after it said its corporate bank will retreat to northwest Europe, exiting the United States, Asia, Australia and Brazil, except for clearing operations. "We are over-exposed to global sectors and we had more than our fair share of exceptional client files," said chief executive Robert Swaak. ABN will focus on areas where it has significant scale, he added, including local energy markets, where the European Union's "green deal" is expected to lead to huge demand for finance. The Dutch state still has a 56 per cent stake in the bank.
The restructuring will affect about 45 per cent of client loans, worth €18 billion and follows several failed attempts to increase the profitability of the corporate bank, which has grappled with losses in offshore energy markets.
"Finally what we wanted," wrote Barclays analysts in a note. Several other European banks have been rethinking their trade and commodity finance operations, including Natixis and BNP Paribas after energy trading losses and a shift to greener finance initiatives.
Write-offs at ABN's corporate bank hit €1.4 billion in the first half, up from €128 million a year before, as oil and gas sector loans soured along with the economic outlook and large Asian clients got into trouble. In China, ABN was lead arranger of a $430 million syndicated loan for two companies under the Fangyuan group, which had liquidity problems last year. It also had nearly $300 million in outstanding loans to Singapore-based Hin Leong Trading, whose founder admitted to hiding hundreds of millions of dollars in losses.
"This has been the higher risk and more volatile part of the bank, which is why we are choosing to wind it down," said chief financial officer Clifford Abrahams. The clearing and European parts which ABN aims to keep, however, were not without their own problems as impairments jumped to €591 million in the second quarter. This was due partly to a "potential fraud case" in Germany, where ABN had a significant exposure to Wirecard. – Reuters