ABN AMRO
Encyclopedia
ABN AMRO Bank N.V. is a Dutch
state-owned bank with headquarters in Amsterdam
. It was re-established, in its current form, in 2009 following the acquisition and break up of ABN AMRO Group by a banking consortium consisting of Royal Bank of Scotland Group, Santander
and Fortis
. Following the collapse of Fortis, the acquirer of the Dutch business, it was nationalized by the Dutch government along with Fortis Bank Nederland
.
The bank is a product of a long history of mergers and acquisitions that date back to 1765. In 1991 Algemene Bank Nederland
(ABN) and Amsterdam and Rotterdam Bank (AMRO) agreed to merge to create the original ABN AMRO. By 2007 ABN AMRO was the second largest bank in the Netherlands
and eighth largest banks in Europe
by assets. At that time the magazine The Banker
and Fortune Global 500
placed the bank at number 15th in the list of world’s biggest banks and it had operations in 63 countries, with over 110,000 employees.
In 2007 the bank was acquired, in what was at that time the biggest bank takeover in history, by a consortium made up of the Royal Bank of Scotland Group, Fortis
bank and Banco Santander, of which the first two got into serious trouble as a result of the takeover. The large amount of debt that had been created to fund the takeover had depleted the banks' reserves just at the time the Financial crisis of 2007–2010 started. As a result the Dutch government took over and nationalized the Dutch parts of the operations which had primarily been allocated to Fortis
to stop it failing. The UK government took effective control over the divisions allocated to RBS due to its financial bail-out of the Scottish bank. The remaining parts of ABN AMRO held by the consortiums RFS Holdings B.V., notably the overseas businesses, were merged with RBS, Santander, sold off or shut down.
The Dutch government appointed former Dutch finance minister Gerrit Zalm
as CEO to restructure and stabilise the bank and in February 2010 the bank was split into two separate organizations. One owned by the Dutch government called ABN AMRO Bank N.V. and the other owned by The Royal Bank of Scotland Group named The Royal Bank of Scotland N.V. On this date the Dutch owned businesses legally demerged from those owned by RBS. The Dutch government owned the ABN AMRO name and used it for the parts of the bank they purchased while other companies within the Group were renamed or closed down.
In 2010 ABN AMRO Group the owner of ABN AMRO Bank was created by merging the former sections of ABN AMRO Nederland, ABN AMRO Private Banking, together with Fortis Bank Nederland
as well as formerly Fortis owned private bank
MeesPierson and International Diamond and Jewelry Group. This started operating under the name ABN AMRO on 1 July 2010 at which time Fortis bank name officially ended. The Dutch government has said it would remain state owned at least until 2014 after which it would consider a public stock market listing for the new bank.
established the Nederlandsche Handel-Maatschappij
(NHM) a trading company to revive trade and financing of the Dutch East Indies
and it would become one of the primary ancestors of ABN AMRO. The NHM merged with the Twentsche Bank in 1964 to form Algemene Bank Nederland (ABN). In the same year the Amsterdamsche Bank which was established in 1871 merged with the Rotterdamsche Bank which was established in 1873 (as part of merger that included Determeijer Weslingh & Zn. from 1765) to form AMRO Bank
. In 1991 ABN and AMRO Bank agreed to merge to create ABN AMRO.
Through these mergers and acquisitions, ABN AMRO gained a large number of overseas companies and branches. From the NHM organisation it had a significant branch network in Asia
and the middle east
. One of these the Saudi Hollandi Bank
which was the old NHM Jeddah
branch and in which ABN AMRO still had a 40% stake, caused questions in the Dutch parliament from the political Party for Freedom
. Another the Hollandsche Bank-Unie
(HBU), which was created from the merger of the Hollandsche Bank voor de Middellandsche Zee (HBMZ) and the Hollandsche Zuid-Amerika Bank in 1933, gave ABN AMRO an extensive network of branches in South and Central America. In 1979 ABN expanded into North America with the acquisition of Chicago
based LaSalle National Bank.
After the merger of ABN and AMRO Bank in 1991, ABN AMRO continued to grow through a number of further acquisitions, including in 1996 the purchase of suburban Detroit based Standard Federal Bank
and in 2001 the Michigan National Bank
both of which were rebranded as LaSalle National bank.
ABN Amro purchased The Chicago Corporation, an American securities and commodities trading and clearing corporation in fall 1995.
Other major acquisitions included the Brazilian bank Banco Real
in 1998 and the Italian bank Antonveneta
in 2006. It was also involved in the controversial acquisition of the Dutch local government mortgage and building development organisation, the Bouwfonds
in 2000. ABN AMRO sold the Bouwfonds as a going concern in 2006.
that would put it among the top 5 of its peer group, a target that the CEO, Rijkman Groenink had set upon his appointment in 2000. From 2000 until 2005, ABN AMRO's stock price stagnated.
Financial results in 2006 added to concerns about the bank's future. Operating expense
s increased at a greater rate than operating revenue, and the efficiency ratio deteriorated further to 69.9%. Non-performing loans increased considerably year on year by 192%. Net profit
s were only boosted by sustained asset
sales.
There had been some calls, over the prior couple of years, for ABN AMRO to break up, to merge, or to be acquired. On February 21, 2007, the call came from the TCI hedge fund
which asked the Chairman of the Supervisory Board to actively investigate a merger, acquisition or breakup of ABN AMRO, stating that the current stock price didn't reflect the true value
of the underlying assets. TCI asked the chairman to put their request on the agenda
of the annual shareholder
s' meeting of April 2007.
Events accelerated when on March 20 the British
bank Barclays
and ABN AMRO both confirmed they were in exclusive talks about a possible merger.
However, on April 18, another British bank, the Royal Bank of Scotland
(RBS) contacted ABN AMRO to propose a deal in which a consortium of banks, including RBS, Belgium
's Fortis
, and Spain
's Banco Santander Central Hispano (now Banco Santander) would jointly bid for ABN AMRO and thereafter break up the different divisions of the company between them. According to the proposed deal, RBS would take over ABN's Chicago operations, LaSalle
, and ABN's wholesale operations; while Banco Santander would take the Brazilian operations and Fortis, the Dutch operations.
On April 23 ABN AMRO and Barclays announced the proposed acquisition of ABN AMRO by Barclays. The deal was valued at €67 billion
. Part of the deal was the sale of LaSalle Bank
to Bank of America
for €21 billion.
Two days later the RBS-led consortium brought out their indicative offer, worth €72 billion, if ABN AMRO would abandon its sale of LaSalle Bank to Bank of America. During the shareholders' meeting the next day, a majority of about 68% of the shareholders voted in favour of the breakup as requested by TCI.
The sale of LaSalle was seen as obstructive by many: as a way of blocking the RBS bid, which hinged on further access to the US markets, in order to expand on the success of the group's existing American brands, Citizens Bank and Charter One
. On May 3, 2007, the Dutch Investors' Association (Vereniging van Effectenbezitters), with the support of shareholders representing up to 20 percent of ABN's shares, took its case to the Dutch commercial court in Amsterdam, asking for an injunction against the LaSalle sale. The court ruled that the sale of LaSalle could not be viewed apart from the current merger talks of Barclays with ABN AMRO, and that the ABN AMRO shareholders should be able to approve other possible merger/acquisition candidates in a general shareholder meeting.
However in July 2007, the Dutch Supreme Court ruled that Bank of America's acquisition of LaSalle Bank Corporation could proceed. Bank of America absorbed LaSalle effective October 1, 2007.
On July 23 Barclays raised its offer for ABN AMRO to €67.5bn, after securing investments from the governments of China and Singapore, but it was still short of the RBS consortium's offer. Barclay's revised bid was worth €35.73 a share — 4.3% more than its previous offer. The offer, which included 37% cash, remained below the €38.40-a-share offer made the week before by the RFS consortium. Their revised offer didn't include an offer for La Salle bank, since ABN AMRO could proceed with the sale of that subsidiary to Bank of America. RBS would now settle for ABN's investment-banking division and its Asian Network.
Barclays Bank withdrew its bid for ABN AMRO on 5 October, clearing the way for the RBS-led consortium's bid to go through, along with its planned dismemberment of ABN AMRO. Fortis would get ABN AMRO's Dutch and Belgian operations, Banco Santander would get Banco Real
in Brazil
, and Banca Antonveneta
in Italy
and RBS would get ABN AMRO's wholesale division and all other operations, including those in Asia.
On October 9, the RFS consortium led by Royal Bank of Scotland, bidding for control of ABN AMRO, formally declared victory after shareholders, representing 86 percent of the Dutch bank’s shares, accepted the RFS group’s €70bn offer. This level of acceptance cleared the way for the consortium to take formal control. The group declared its offer unconditional on October 10, when Fortis completed its €13bn rights issue. Thus the financing required for the group’s €38-a-share offer, which included €35.60 in cash, was realised. Rijkman Groenink, Chairman of the Managing Board of ABN AMRO, who heavily backed the Barclays offer, decided that he would step down.
On 22 April 2008 RBS announced the largest rights issue in British corporate history, which aimed to raise £12billion in new capital to offset a writedown of £5.9billion resulting from the bad investments and to shore up its reserves following the purchase of ABN AMRO.
On 13 October 2008, British Prime Minister Gordon Brown
announced a UK government bailout of the financial system. The Treasury would infuse £37 billion ($64 billion, €47 billion) of new capital into Royal Bank of Scotland Group Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse. This resulted in a total government ownership in RBS of 58%.
As a consequence of this rescue the chief executive of the group Sir Fred Goodwin offered his resignation, which was duly accepted.
In January 2009 it was announced that RBS had made a loss of £28bn of which £20bn was due to ABN AMRO. At the same time the government converted their preference shares to ordinary shares resulting in a 70% ownership of RBS.
On July 11, 2008, the CEO of Fortis, Jean Votron, stepped down after the ABN AMRO deal had depleted Fortis' capital. The total worth of Fortis, as reflected by its stock value, was at that time a third of what it had been before the acquisition, and just under the value it had paid merely for the Benelux activities of ABN AMRO.
Fortis announced in September 2008 that it intended to sell its stake in RFS Holdings, which includes all activities that have not been transferred yet to Fortis (i.e. everything except Asset Management).
interests in 32 European companies managed by AAC Capital Partners to a consortium comprising Goldman Sachs
, AlpInvest Partners
and CPP
for $1.5 billion through a private equity secondary market
transaction.
In September 2009, RBS rebranded the Morgans sharedealing business in Australia
as RBS Morgans in September 2009. This followed the rebranding of the ABN AMRO Australia unit to RBS Australia in March that year.
On 10 February 2010, RBS announced that branches of the businesses it owned in India
and the United Arab Emirates
were to be rebranded under its name. HSBC
Holdings said it would buy the Indian retail and commercial banking businesses of Royal Bank of Scotland for $1.8b.
president have announced the merger of Dutch Fortis and ABN AMRO parts will proceed while the bank is in state ownership.
In January 2009, it was reported that shareholders in Belgium-based Fortis plan to file a lawsuit against the Belgian government over its handling of the carve-up of the troubled financial services group and are also considering a case against the Dutch government. The initial outcome of the lawsuit favours the Dutch state.
On 9 February 2010, the businesses of ABN AMRO acquired by the Dutch state were legally demerged from the RBS acquired businesses. This created two separate banks within ABN AMRO Holdings, The Royal Bank of Scotland
and the new entity named ABN AMRO Bank, each licensed separately by the Dutch Central Bank.
, stood to reap great financial benefit in the event of default.
. Businesses include a private bank
focusing on high-net-worth clients in 14 countries and a commercial and merchant banking operation, which is a player in specialist markets such as energy, commodities and transportation as well as brokerage, Clearing & Custody.
for ABN AMRO in 1991 and has been used as a brand for the bank and all its subsidiaries.
football club between from 1991 to 2008. The sponsor logo was the only one in the world to be printed vertically down the right hand side of the front of the shirt.
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
state-owned bank with headquarters in Amsterdam
Amsterdam
Amsterdam is the largest city and the capital of the Netherlands. The current position of Amsterdam as capital city of the Kingdom of the Netherlands is governed by the constitution of August 24, 1815 and its successors. Amsterdam has a population of 783,364 within city limits, an urban population...
. It was re-established, in its current form, in 2009 following the acquisition and break up of ABN AMRO Group by a banking consortium consisting of Royal Bank of Scotland Group, Santander
Grupo Santander
The Santander Group is a banking group centered on Banco Santander, S.A., the largest bank in the Eurozone and one of the largest banks in the world in terms of market capitalisation. According to Forbes Magazine Global 2000, it is the 13th largest public company in the world...
and Fortis
Fortis (finance)
Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities...
. Following the collapse of Fortis, the acquirer of the Dutch business, it was nationalized by the Dutch government along with Fortis Bank Nederland
Fortis Bank Nederland
Fortis Bank Nederland was a bank in the Netherlands until 2010.The holding came into being within Fortis Bank, as a holding for those Dutch banks taken over by Fortis...
.
The bank is a product of a long history of mergers and acquisitions that date back to 1765. In 1991 Algemene Bank Nederland
Algemene Bank Nederland
Algemene Bank Nederland was a Dutch bank that became one of the main predecessors in ABN AMRO. It was created in 1964 when the Nederlandsche Handel-Maatschappij merged with De Twentsche Bank...
(ABN) and Amsterdam and Rotterdam Bank (AMRO) agreed to merge to create the original ABN AMRO. By 2007 ABN AMRO was the second largest bank in the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and eighth largest banks in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
by assets. At that time the magazine The Banker
The Banker
The Banker is an English-language monthly international financial affairs publication owned by The Financial Times Ltd. and edited in London...
and Fortune Global 500
Fortune Global 500
The Fortune Global 500 is a ranking of the top 500 corporations worldwide as measured by revenue. The list is compiled and published annually by Fortune magazine....
placed the bank at number 15th in the list of world’s biggest banks and it had operations in 63 countries, with over 110,000 employees.
In 2007 the bank was acquired, in what was at that time the biggest bank takeover in history, by a consortium made up of the Royal Bank of Scotland Group, Fortis
Fortis (finance)
Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities...
bank and Banco Santander, of which the first two got into serious trouble as a result of the takeover. The large amount of debt that had been created to fund the takeover had depleted the banks' reserves just at the time the Financial crisis of 2007–2010 started. As a result the Dutch government took over and nationalized the Dutch parts of the operations which had primarily been allocated to Fortis
Fortis (finance)
Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities...
to stop it failing. The UK government took effective control over the divisions allocated to RBS due to its financial bail-out of the Scottish bank. The remaining parts of ABN AMRO held by the consortiums RFS Holdings B.V., notably the overseas businesses, were merged with RBS, Santander, sold off or shut down.
The Dutch government appointed former Dutch finance minister Gerrit Zalm
Gerrit Zalm
Gerrit Zalm is a retired Dutch politician of the People's Party for Freedom and Democracy . He served as Minister of Finance and Deputy Prime Minister from May 27, 2003 until February 22, 2007 in the Cabinets Balkenende II and III. He served earlier as Minister of Finance in the Cabinets Kok I and...
as CEO to restructure and stabilise the bank and in February 2010 the bank was split into two separate organizations. One owned by the Dutch government called ABN AMRO Bank N.V. and the other owned by The Royal Bank of Scotland Group named The Royal Bank of Scotland N.V. On this date the Dutch owned businesses legally demerged from those owned by RBS. The Dutch government owned the ABN AMRO name and used it for the parts of the bank they purchased while other companies within the Group were renamed or closed down.
In 2010 ABN AMRO Group the owner of ABN AMRO Bank was created by merging the former sections of ABN AMRO Nederland, ABN AMRO Private Banking, together with Fortis Bank Nederland
Fortis Bank Nederland
Fortis Bank Nederland was a bank in the Netherlands until 2010.The holding came into being within Fortis Bank, as a holding for those Dutch banks taken over by Fortis...
as well as formerly Fortis owned private bank
Private bank
Private banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner with limited partner...
MeesPierson and International Diamond and Jewelry Group. This started operating under the name ABN AMRO on 1 July 2010 at which time Fortis bank name officially ended. The Dutch government has said it would remain state owned at least until 2014 after which it would consider a public stock market listing for the new bank.
Early years
In 1824 King William IWilliam I of the Netherlands
William I Frederick, born Willem Frederik Prins van Oranje-Nassau , was a Prince of Orange and the first King of the Netherlands and Grand Duke of Luxembourg....
established the Nederlandsche Handel-Maatschappij
Nederlandsche Handel-Maatschappij
The Netherlands Trading Society was a Dutch trading company established in 1824 by King Willem I of the Netherlands to promote and develop trade, shipping and agriculture...
(NHM) a trading company to revive trade and financing of the Dutch East Indies
Dutch East Indies
The Dutch East Indies was a Dutch colony that became modern Indonesia following World War II. It was formed from the nationalised colonies of the Dutch East India Company, which came under the administration of the Netherlands government in 1800....
and it would become one of the primary ancestors of ABN AMRO. The NHM merged with the Twentsche Bank in 1964 to form Algemene Bank Nederland (ABN). In the same year the Amsterdamsche Bank which was established in 1871 merged with the Rotterdamsche Bank which was established in 1873 (as part of merger that included Determeijer Weslingh & Zn. from 1765) to form AMRO Bank
AMRO Bank
AMRO Bank was a major Dutch bank that was created from the merger of the Amsterdamsche Bank and the Rotterdamsche Bank in 1964. Its name comes from the first two letters of the two originating banks...
. In 1991 ABN and AMRO Bank agreed to merge to create ABN AMRO.
Through these mergers and acquisitions, ABN AMRO gained a large number of overseas companies and branches. From the NHM organisation it had a significant branch network in Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
and the middle east
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
. One of these the Saudi Hollandi Bank
Saudi Hollandi Bank
The Saudi Hollandi Bank is a bank based in Saudi Arabia. It was the first operating bank in the Kingdom of Saudi Arabia and was originally founded in 1926 as a branch of the Netherlands Trading Society.-History:...
which was the old NHM Jeddah
Jeddah
Jeddah, Jiddah, Jidda, or Jedda is a city located on the coast of the Red Sea and is the major urban center of western Saudi Arabia. It is the largest city in Makkah Province, the largest sea port on the Red Sea, and the second largest city in Saudi Arabia after the capital city, Riyadh. The...
branch and in which ABN AMRO still had a 40% stake, caused questions in the Dutch parliament from the political Party for Freedom
Party for Freedom
The Party for Freedom is a Dutch right-wing political party. Founded in 2005 as the successor to Geert Wilders' one-man party in the House of Representatives, it won nine seats in the 2006 general election, making it the fifth largest party in parliament, and third largest opposition party. It...
. Another the Hollandsche Bank-Unie
Hollandsche Bank-Unie
Hollandsche Bank-Unie was a second-tier domestic bank in the Netherlands which was absorbed by Deutsche Bank in 2010, but one with a fascinating international history.-Establishment:...
(HBU), which was created from the merger of the Hollandsche Bank voor de Middellandsche Zee (HBMZ) and the Hollandsche Zuid-Amerika Bank in 1933, gave ABN AMRO an extensive network of branches in South and Central America. In 1979 ABN expanded into North America with the acquisition of Chicago
Chicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
based LaSalle National Bank.
After the merger of ABN and AMRO Bank in 1991, ABN AMRO continued to grow through a number of further acquisitions, including in 1996 the purchase of suburban Detroit based Standard Federal Bank
Standard Federal Bank
Standard Federal Bank was a Troy, Michigan-based bank serving Michigan and Northern Indiana which began doing business as Bank of America on 5 May 2008....
and in 2001 the Michigan National Bank
Michigan National Bank
Michigan National Bank was a bank founded in Lansing, Michigan, which was established on 31 December 1940 when Howard J Stoddard consolidated six Michigan banks: First National Bank and Trust Company of Grand Rapids, First National Trust and Savings Bank of Port Huron, Lansing National Bank,...
both of which were rebranded as LaSalle National bank.
ABN Amro purchased The Chicago Corporation, an American securities and commodities trading and clearing corporation in fall 1995.
Other major acquisitions included the Brazilian bank Banco Real
Banco Real
Banco Real was a Brazilian bank, owned by Spain's Banco Santander. ABN AMRO had owned the bank but in October 2007, a consortium led by Royal Bank of Scotland that also included Banco Santander and Belgium's Fortis, acquired ABN AMRO and proceeded to dismember it...
in 1998 and the Italian bank Antonveneta
Antonveneta
Antonveneta , was in 2008 the 9th largest banking group in Italy in terms of customer loans and the 8th largest in terms of total assets, with 1,000 branches, 10,800 employees and €50bn in assets....
in 2006. It was also involved in the controversial acquisition of the Dutch local government mortgage and building development organisation, the Bouwfonds
Bouwfonds
Bouwfonds is an international real estate company and one of the largest in the Netherlands. The company was established in 1946, just after the Second World War, as local government property developer with the aim to help working class people buy their own home.. In 2000 it was sold to ABN Amro...
in 2000. ABN AMRO sold the Bouwfonds as a going concern in 2006.
Reaching a cross roads
ABN AMRO had come to a crossroads in the beginning of 2005. The bank had still not come close to its own target of having an ROEReturn on equity
Return on equity measures the rate of return on the ownership interest of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity . ROE shows how well a company uses investment funds to generate earnings growth...
that would put it among the top 5 of its peer group, a target that the CEO, Rijkman Groenink had set upon his appointment in 2000. From 2000 until 2005, ABN AMRO's stock price stagnated.
Financial results in 2006 added to concerns about the bank's future. Operating expense
Operating expense
An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an ongoing cost for running a product, business, or system . Its counterpart, a capital expenditure , is the cost of developing or providing non-consumable parts for the product or system...
s increased at a greater rate than operating revenue, and the efficiency ratio deteriorated further to 69.9%. Non-performing loans increased considerably year on year by 192%. Net profit
Net profit
Net profit or net revenue is a measure of the profitability of a venture after accounting for all costs. In a survey of nearly 200 senior marketing managers, 91 percent responded that they found the "net profit" metric very useful...
s were only boosted by sustained asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...
sales.
There had been some calls, over the prior couple of years, for ABN AMRO to break up, to merge, or to be acquired. On February 21, 2007, the call came from the TCI hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
which asked the Chairman of the Supervisory Board to actively investigate a merger, acquisition or breakup of ABN AMRO, stating that the current stock price didn't reflect the true value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
of the underlying assets. TCI asked the chairman to put their request on the agenda
Agenda (meeting)
An agenda is a list of meeting activities in the order in which they are to be taken up, by beginning with the call to order and ending with adjournment. It usually includes one or more specific items of business to be discussed. It may, but is not required to, include specific times for one or...
of the annual shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s' meeting of April 2007.
Events accelerated when on March 20 the British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
bank Barclays
Barclays plc
Barclays PLC is a global banking and financial services company headquartered in London, United Kingdom. As of 2010 it was the world's 10th-largest banking and financial services group and 21st-largest company according to a composite measure by Forbes magazine...
and ABN AMRO both confirmed they were in exclusive talks about a possible merger.
Acquisition battle
On March 28, ABN AMRO published the agenda for the shareholders' meeting of 2007. It included all items requested by TCI, but with the recommendation not to follow the request for a breakup of the company.Royal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...
(RBS) contacted ABN AMRO to propose a deal in which a consortium of banks, including RBS, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
's Fortis
Fortis (finance)
Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities...
, and Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
's Banco Santander Central Hispano (now Banco Santander) would jointly bid for ABN AMRO and thereafter break up the different divisions of the company between them. According to the proposed deal, RBS would take over ABN's Chicago operations, LaSalle
LaSalle Bank
LaSalle Bank Corporation was the holding company for LaSalle Bank N.A. and LaSalle Bank Midwest N.A. . With $116 billion in assets, it was headquartered at 135 South LaSalle Street in Chicago, Illinois...
, and ABN's wholesale operations; while Banco Santander would take the Brazilian operations and Fortis, the Dutch operations.
On April 23 ABN AMRO and Barclays announced the proposed acquisition of ABN AMRO by Barclays. The deal was valued at €67 billion
Long and short scales
The long and short scales are two of several different large-number naming systems used throughout the world for integer powers of ten. Many countries, including most in continental Europe, use the long scale whereas most English-speaking countries use the short scale...
. Part of the deal was the sale of LaSalle Bank
LaSalle Bank
LaSalle Bank Corporation was the holding company for LaSalle Bank N.A. and LaSalle Bank Midwest N.A. . With $116 billion in assets, it was headquartered at 135 South LaSalle Street in Chicago, Illinois...
to Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
for €21 billion.
Two days later the RBS-led consortium brought out their indicative offer, worth €72 billion, if ABN AMRO would abandon its sale of LaSalle Bank to Bank of America. During the shareholders' meeting the next day, a majority of about 68% of the shareholders voted in favour of the breakup as requested by TCI.
The sale of LaSalle was seen as obstructive by many: as a way of blocking the RBS bid, which hinged on further access to the US markets, in order to expand on the success of the group's existing American brands, Citizens Bank and Charter One
Citizens Financial Group
Citizens Financial Group, Inc. is an American bank headquartered in Providence, Rhode Island, which operates in the states of Connecticut, Delaware, Illinois, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island and Vermont. Citizens is a wholly owned...
. On May 3, 2007, the Dutch Investors' Association (Vereniging van Effectenbezitters), with the support of shareholders representing up to 20 percent of ABN's shares, took its case to the Dutch commercial court in Amsterdam, asking for an injunction against the LaSalle sale. The court ruled that the sale of LaSalle could not be viewed apart from the current merger talks of Barclays with ABN AMRO, and that the ABN AMRO shareholders should be able to approve other possible merger/acquisition candidates in a general shareholder meeting.
However in July 2007, the Dutch Supreme Court ruled that Bank of America's acquisition of LaSalle Bank Corporation could proceed. Bank of America absorbed LaSalle effective October 1, 2007.
Acquisition and break up
On July 30 ABN AMRO withdrew its support for Barclays’ offer which was lower than the offer from the group led by RBS. While the Barclays offer matched ABN AMRO’s “strategic vision,” the board couldn’t recommend it from “a financial point of view.” The US$98.3bn bid from RBS, Fortis and Banco Santander was 9.8% higher than Barclays’ offer.Barclays Bank withdrew its bid for ABN AMRO on 5 October, clearing the way for the RBS-led consortium's bid to go through, along with its planned dismemberment of ABN AMRO. Fortis would get ABN AMRO's Dutch and Belgian operations, Banco Santander would get Banco Real
Banco Real
Banco Real was a Brazilian bank, owned by Spain's Banco Santander. ABN AMRO had owned the bank but in October 2007, a consortium led by Royal Bank of Scotland that also included Banco Santander and Belgium's Fortis, acquired ABN AMRO and proceeded to dismember it...
in Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
, and Banca Antonveneta
Antonveneta
Antonveneta , was in 2008 the 9th largest banking group in Italy in terms of customer loans and the 8th largest in terms of total assets, with 1,000 branches, 10,800 employees and €50bn in assets....
in Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
and RBS would get ABN AMRO's wholesale division and all other operations, including those in Asia.
On October 9, the RFS consortium led by Royal Bank of Scotland, bidding for control of ABN AMRO, formally declared victory after shareholders, representing 86 percent of the Dutch bank’s shares, accepted the RFS group’s €70bn offer. This level of acceptance cleared the way for the consortium to take formal control. The group declared its offer unconditional on October 10, when Fortis completed its €13bn rights issue. Thus the financing required for the group’s €38-a-share offer, which included €35.60 in cash, was realised. Rijkman Groenink, Chairman of the Managing Board of ABN AMRO, who heavily backed the Barclays offer, decided that he would step down.
RBS
On 13 October 2008, British Prime Minister Gordon Brown
Gordon Brown
James Gordon Brown is a British Labour Party politician who was the Prime Minister of the United Kingdom and Leader of the Labour Party from 2007 until 2010. He previously served as Chancellor of the Exchequer in the Labour Government from 1997 to 2007...
announced a UK government bailout of the financial system. The Treasury would infuse £37 billion ($64 billion, €47 billion) of new capital into Royal Bank of Scotland Group Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse. This resulted in a total government ownership in RBS of 58%.
As a consequence of this rescue the chief executive of the group Sir Fred Goodwin offered his resignation, which was duly accepted.
In January 2009 it was announced that RBS had made a loss of £28bn of which £20bn was due to ABN AMRO. At the same time the government converted their preference shares to ordinary shares resulting in a 70% ownership of RBS.
Fortis
Fortis announced in September 2008 that it intended to sell its stake in RFS Holdings, which includes all activities that have not been transferred yet to Fortis (i.e. everything except Asset Management).
Disposals and renaming
In 2008, RFS Holdings completed the sale of a portfolio of private equityPrivate equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
interests in 32 European companies managed by AAC Capital Partners to a consortium comprising Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, AlpInvest Partners
AlpInvest Partners
AlpInvest Partners is a private equity investment manager and at the end of 2009 globally managed over €42 billion ....
and CPP
Canada Pension Plan
The Canada Pension Plan is a contributory, earnings-related social insurance program. It forms one of the two major components of Canada's public retirement income system, the other component being Old Age Security...
for $1.5 billion through a private equity secondary market
Private equity secondary market
In finance, the private equity secondary market refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds....
transaction.
In September 2009, RBS rebranded the Morgans sharedealing business in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
as RBS Morgans in September 2009. This followed the rebranding of the ABN AMRO Australia unit to RBS Australia in March that year.
On 10 February 2010, RBS announced that branches of the businesses it owned in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
and the United Arab Emirates
United Arab Emirates
The United Arab Emirates, abbreviated as the UAE, or shortened to "the Emirates", is a state situated in the southeast of the Arabian Peninsula in Western Asia on the Persian Gulf, bordering Oman, and Saudi Arabia, and sharing sea borders with Iraq, Kuwait, Bahrain, Qatar, and Iran.The UAE is a...
were to be rebranded under its name. HSBC
HSBC
HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine...
Holdings said it would buy the Indian retail and commercial banking businesses of Royal Bank of Scotland for $1.8b.
Dutch government ownership
Continuing problems in the Fortis operations in the 2008 financial crisis led to the Dutch state obtaining full control (for €16.8bn) of all Fortis operations in the Netherlands, including those parts of ABN-AMRO then belonging to Fortis. The Dutch government and the De Nederlandsche BankDe Nederlandsche Bank
De Nederlandsche Bank is the central bank of the Netherlands. It is part of the European System of Central Banks .-History:...
president have announced the merger of Dutch Fortis and ABN AMRO parts will proceed while the bank is in state ownership.
In January 2009, it was reported that shareholders in Belgium-based Fortis plan to file a lawsuit against the Belgian government over its handling of the carve-up of the troubled financial services group and are also considering a case against the Dutch government. The initial outcome of the lawsuit favours the Dutch state.
On 9 February 2010, the businesses of ABN AMRO acquired by the Dutch state were legally demerged from the RBS acquired businesses. This created two separate banks within ABN AMRO Holdings, The Royal Bank of Scotland
Royal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...
and the new entity named ABN AMRO Bank, each licensed separately by the Dutch Central Bank.
Goldman Sachs SEC Lawsuit
ABN Amro was mentioned by the SEC in court fillings when it sued Goldman Sachs and one of Goldman's CDO traders on April 16, 2010. The SEC alleges that ABN Amro was on the wrong side of the CDO instruments Goldman was creating and that Goldman defrauded both IKB (a German bank) and ABN-Amro in failing to disclose that the CDO's ABN Amro was purchasing were not assembled by a third party, but instead through the guidance of a hedge fund that was counterparty in the CDS transaction. This hedge fund, Paulson & Co.Paulson & Co.
Paulson & Co. Inc. is a hedge fund sponsor owned by its employees and founded in 1994 by John Paulson.-Overview:Paulson & Co. Inc. is an employee-owned, hedge fund headquartered in New York, New York...
, stood to reap great financial benefit in the event of default.
Bank Operations
ABN AMRO Bank has offices in 15 countries, but all but 5,000 of its 32,000 employees are in the NetherlandsNetherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
. Businesses include a private bank
Private bank
Private banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner with limited partner...
focusing on high-net-worth clients in 14 countries and a commercial and merchant banking operation, which is a player in specialist markets such as energy, commodities and transportation as well as brokerage, Clearing & Custody.
Financial data
| Years | 2002 | 2003 | 2004 | 2005 | 2006 |
|---|---|---|---|---|---|
| Sales Sales A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity.... net of interest |
€18.280mn | €18.793mn | €19.793mn | €23.215mn | €27.641mn |
| EBITDA EBITDA EBITDA is an acronym for earnings before interest, taxes, depreciation, and amortization. It is a non-GAAP metric that is measured exactly as stated. All interest, tax, depreciation and amortization entries in the income statement are reversed out from the bottom-line net income... |
€4.719mn | €5.848mn | €6.104mn | €6.705mn | €6.360mn |
| Net Result Share of the group | €2.267mn | €3.161mn | €4.109mn | €4.443mn | €4.780mn |
| Staff | 105,000 | 105,439 | 105,918 | 98,080 | 135,378 |
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Alumni
Former employees of ABN AMRO:- Vladimer Gurgenidze, Former Prime Minister of GeorgiaPrime Minister of GeorgiaThe Prime Minister of Georgia is the most senior minister within the Cabinet of Georgia, appointed by the President of Georgia. The official title of the Head of the Government of Georgia has varied throughout history, however, the duties and functions of the leader have changed only marginally....
, former employee of ABN AMRO - John HewsonJohn HewsonJohn Robert Hewson AM is an Australian economist, company director and a former politician. He was federal leader of the Liberal Party of Australia from 1990 to 1994 and led the party to defeat at the 1993 federal election.-Early life:...
- Member of the Australian House of Representatives (1987-1995) - Joop WijnJoop WijnJoannes Gerardus Wijn was Minister of Economic Affairs in the third Balkenende cabinet of the Netherlands....
- Dutch Minister of Economic Affairs (2006-2007) - Graeme Le SauxGraeme Le SauxGraeme Pierre Le Saux is a retired English footballer of French ancestry who played for the Premier League clubs Chelsea, Blackburn Rovers and Southampton, and for the England national football team. Primarily a left back, he was sometimes also played in midfield or on the left wing.After...
- English football player
Name Usage and spelling
The bank refers to itself as ABN AMRO in all capitals, based on an acronym of the two originating banks names Algemene Bank Nederland and the Amsterdam and Rotterdam Bank, in the second case the first two letters of each town make up the AMRO. The letters in 'ABN' are pronounced separately and 'AMRO' is pronounced as a word. For this reason some media spell the name as 'ABN Amro'. In written text both versions are used, although the bank itself uses only the uppercase version. In verbal conversations the bank is sometimes referred to as just ABN bank.Logo and Style
The green and yellow shield logo was designed by the design house Landor AssociatesLandor Associates
Landor Associates is a San Francisco-based brand and creative design consultancy. Founded by Walter Landor and his wife Josephine in 1941, Landor pioneered many of the research, design and consulting methodologies that are now standard in the branding industry.-Operations:Landor offers brand...
for ABN AMRO in 1991 and has been used as a brand for the bank and all its subsidiaries.
Sponsorships
ABN AMRO was the main sponsor of Ajax AmsterdamAjax Amsterdam
Amsterdamsche Football Club Ajax , also referred to as AFC Ajax, Ajax Amsterdam or simply Ajax , is a professional football club from Amsterdam, Netherlands...
football club between from 1991 to 2008. The sponsor logo was the only one in the world to be printed vertically down the right hand side of the front of the shirt.
See also
- History of bankingHistory of bankingThe first banks were the merchants of the ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in Assyria and Babylonia...
- Primary dealersPrimary dealersPrimary dealer is a formal designation of a firm as a market maker of government securities. Primary dealer systems are present in many countries including Canada, France, Italy, Spain, the United Kingdom, and the United States...
- European Financial Services RoundtableEuropean Financial Services RoundtableThe European Financial Services Roundtable is a European organization, located in Brussels, Belgium, of financial service companies to provide a voice on policies of the European Union related to financial matters...