AMSTERDAM (BLOOMBERG) - ABN Amro Bank will stop providing corporate finance outside Europe and exit trade and commodity financing altogether as the Dutch bank tries to turn around an investment banking division hit hard by market chaos caused by the coronavirus crisis.
As many as 800 jobs, or a third of the total, are at risk in a plan to hive off and wind down activities that account for about 45 per cent of the unit's client loans, the Dutch bank said on Wednesday (Aug 12). The process will take three to four years, it said. The natural resources and transportation and logistics parts of the business will focus on European clients only.
Corporate banking in the US, Asia, Australia and Brazil will be wound down, but the bank will retain its global clearing business, one of the world's biggest, the company said.
"Clearing has taken several de-risking measures in the past months following a large loss incurred earlier this year," it said. The bank said it expects additional impairments related to job losses and the wind down of corporate loans.
When contacted by The Straits Times, a bank spokesman confirmed that only clearing services will remain in Singapore. "We expect the wind down of the non-core activities to take three to four years globally. At what pace will differ per business line and region. This will be worked out in the coming period."
He added: "We can not yet say exactly how many jobs in Singapore are impacted. This will also be worked out in the coming period."
ABN Amro was among the 20 banks hit by the collapse of Hin Leong Trading. As the Singapore oil trader's second largest bank creditor, it was said to be owed US$300 million (S$412 million). French bank Societe Generale shut its trade commodity desk in Singapore earlier this month after Hin Leong's fall prompted the bank to halt fresh funding to such firms in the region.
Other European lenders including Deutsche Bank, Societe Generale and BNP Paribas have been slashing and refocusing their investment banks as they seek to cut costs and get out of higher-risk businesses. ABN Amro's chief executive officer Robert Swaak accelerated his review of the investment bank as volatile markets hit profitability and caused large impairments at the unit.
The investment bank "has been unable to generate the required profitability at an acceptable risk level," the bank said said. Efforts to lower risk since 2018 "were unfortunately insufficient. The results were further impacted by recent volatility and a downturn in certain markets."
The bank reported a net loss of 5 million euros (S$8.1 million) for the quarter on writedowns an a slowdown in leding prompted by the Covid-19 crisis. Provisions for loan losses declined to 703 million euros from 1.1. billion euros in the first quarter. ABN Amro said it expects provisions to total 3 billion euros this year, partly on costs to wind down loans at the investment bank. That's up from an earlier prediction of 2.5 billion euros.
ABN Amro is also among the four banks with the highest exposure to Wirecard, the defunct payments company that prompted competitors ING Groep and Commerzbank to take provisions of about 175 million euros each in the second quarter, Bloomberg reported in June. The bank said an "exceptional client file" contributed to the high impairments in the second quarter.
The corporate and investment bank accounted for 14.5 per cent of group profit last year and the unit's headcount was a similar share of the total. The investment bank's activities carry much more risk ABN Amro's retail business and require more capital as well, making it costly to squeeze out decent profits in good times.
In the previous quarter, the lender wrote down 460 million euros on two individual client cases, which contributed to its first loss since 2013. Even before the coronavirus crisis, the investment bank fell short ABN Amro's 10 per cent to 13 per cent return on equity target.
Additional reporting by Choo Yun Ting