ABN AMRO

ABN AMRO is a large Dutch bank, which is owned by a consortium of the Royal Bank of Scotland, the Spanish Banco Santander and the Government of the Netherlands (through their ownership of Fortis). It had close ties to the Dutch Royal Family (the house of Orange) and was founded in 1824.

ABN AMRO was subject to the largest banking takeover ever, although it was a major reason why two of the banks that took over ABN AMRO, Fortis and the Royal Bank of Scotland, needed to have substantial government rescues. It is currently going through a transition that will involve transferring all the businesses to the three owners.

The Dutch government owned brand is intended to keep the ABN AMRO name and will be run under the supervision of the Dutch central bank. There is an intention to privatize the company at a future date. This slimmer version will consist of the Netherlands retail operations, the private banking operations and the International Diamond and Jewelry group. The International Diamond and Jewelry group is not a diamond dealer but rather a specialist in the provision o financial services to the jewelry trade, capitalizing on Antwerp’s central position as the clearing house of the worldwide diamond market. It aims to provide an integrated solution including investment banking, private banking and commercial loans.

Eventually the Dutch owned ABN-AMRO will be merged with the remains of Fortis Bank, which is also owned by the Dutch government. This is not a long term position for the Dutch government as they are rescued Fortis bank due to the turmoil in the world credit markets in 2008. There is an agreement to sell both the Dutch owned ABN-AMRO operations together with the Fortis Bank to the German giant Deutsche Bank, the largest bank in Germany.

Banco Santander, the Spanish banking group has acquired the Latin American operations of ABN AMRO, with the exception of wholesale clients. Latin America was an area of particular strength for ABN AMRO, and a number of banks operated as subsidiaries including Banco Real.

Most of the other assets were acquired by the Royal Bank of Scotland, who originally initiated the takeover. RBS was mainly interested in the corporate and investment banking operations rather than the retail operations. In the Netherlands, the Royal Bank of Scotland is taking the Dutch corporate banking arm together with the international investment banking operation. They have stated that they wish to expand these operations, although as they are currently making a loss and are expected to get rid of a large amount of staff, and they are owned mostly by the British government, it remains to be seen how tenable any expansion plans for the Royal Bank of Scotland outside Britain are.

ABN AMRO had a strong position in the rest of Europe as a leading fixed income operator, and the Royal Bank of Scotland is taking over this position, merging it with its own operations. The Royal Bank of Scotland is also interested in ABN AMRO’s Asian operations, where both banks had previously been aggressively going after the private banking business of newly rich Asian businessmen. There will also be business in the United States and Canada that will go to the Royal Bank of Scotland, although the prime asset in the business unit was sold to the Bank of America during the takeover.

The Royal Bank of Scotland is now in an awkward position as when it started the takeover in 2007 it was a fast growing, ambitious and privately held bank. It completed its purchase of ABN AMRO, after a bruising battle with the other British bank, Barclays, just before the credit crunch. Its borrowings meant that it was unsustainable when credit tightened and it was effectively nationalized by the British Government. Thus many of the expansion plans it had for ABN AMRO before the merger will be hard to justify now that they are government owned.