ABN AMRO Holding, N.V.

Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
Telephone: (31) 20-628-9393
Fax: (31) 20-629-9111
Web site: http://www.abnamro.com

Public Company
Employees: 111,710
Sales: EUR 18.8 billion (US $16.8 billion) (2001)
Stock Exchanges: Amsterdam Frankfurt London New York Paris
Ticker Symbol: ABN (New York)
NAIC: 522110 Commercial Banking

Rooted in 19th-century Dutch East Indies trade, ABN AMRO Holding, NV has grown into a major international bank with operations in more than 60 countries. The Amsterdam-based holding company is the top banking group in the Netherlands, where it has one-quarter of its 3,400 branches. With $600 billion in total assets, it stands as the seventh largest bank in Europe, and 13th largest in the world. ABN AMRO is the biggest foreign bank in the United States where it maintains a robust Midwest presence. American subsidiaries include Michigan’s largest bank, Standard Federal, and LaSalle Bank NA, a leading bank in the Chicago area. The bank also has significant operations in Brazil. ABN AMRO reorganized at the start of 2001, dividing its operating divisions into a trio of strategic business units. At the same time it sold many non-core operations around the world and withdrew from investment banking in the United States. The company has about 111,000 employees worldwide.

Holland’s King Launches ABN in 1824

The 1991 marriage of the two largest banks in the Netherlands—Amsterdam-Rotterdam Bank (AMRO) and Algemene Bank Nederland (ABN)—gave rise to ABN AMRO. However, each bank arrived at the wedding as a product of previous banking mergers. ABN’s original ancestor was The Netherlands Trading Society (Nederlandsche Handel-Maatschapijj), a company created in 1824 by decree of the Netherlands’ King Willem I—Holland’s Merchant Monarch. The King and company founders intended to revive the trading in the Dutch East Indies (Indonesia) that had flourished during the 17th and 18th centuries with the Dutch East Indies Company. The Netherlands Trading Society (NTS) managed its operations from the Dutch colony on Java, Indonesia’s largest island and commercial hub. It financed the export of agricultural products which, between 1840 and 1880, brought the Dutch treasury an average of 18 million guidens a year, about one-third of the country’s budget. NTS opened offices in Shanghai (1825), Singapore (1858), Hong Kong (1906), and elsewhere around Asia, and soon expanded into traditional banking operations with credits, time deposits, and security orders. In 1926, NTS founded Saudi Hollandi Bank in Jeddah to serve the Islamic pilgrims from the Dutch East Indies. For many years it operated as Saudi Arabia’s central bank maintaining the gold stock of the country, and processing its first oil-related transactions.

NTS survived both World War I and worldwide depression in the 1930s. World War II, however, crippled the company. Germany occupied the Netherlands and Japan controlled Indonesia. NTS attempted to recover by focusing on expansion and opening branches throughout the Netherlands. But by the early 1960s, competition among the numerous Dutch banks had escalated and produced a period of consolidation. In 1964, NTS opted to merge with Twentsche Bank, a 100-year-old Dutch agriculture bank, and took on the new moniker—Algemene Bank Nederland (ABN). Seeking more international balance, ABN in 1967 acquired Hollandsche Bank Unie, which had a large presence in South America. In 1975, ABN bought Mees & Hope Bankiers, a Dutch bank with significant investment banking business and solid network of branches. Mees & Hope continued to do business under its own name, and later added private asset management and fiduciary services for international clients. ABN’s international reach also extended to the United States. In 1972, the bank formed ABN Corporation to represent its North American subsidiaries. The bank secured a firm foothold in the Midwest in 1979 when it purchased LaSalle National Bank, the sixth largest bank in the Chicago area with 700 employees. Two years later, in a restructuring move, La-Salle Bank became part of the ABN holding company LaSalle National Corporation. The holding company went on to acquire six other Midwest banks including Exchange Bancorporation.

AMRO Is Born in Rotterdam: 1863

AMRO, ABN’s merger partner, also began by financing Dutch East Indies trade. In 1863, a group of Rotterdam businesspeople and bankers created the Rotterdamsche Bank, lending funds to Dutch companies operating in Indonesia. The bank expanded its local lending activity to other businesses in the Netherlands, then added brokerage and securities firms to the banking operations through mergers. By the early 1900s, the company had a listing on the Amsterdam Stock Exchange. Renamed the Rotterdamsche Bankvereeniging, or Robaver, the bank continued to acquire local banks and also establish overseas bank branches in the West Indies (Antilles and the Bahamas) and Russia. By the early 1920s, Robaver stood as one of the largest banks in the Netherlands, and one of the more progressive banks as well. In 1928 it opened Vrouwenbank, a bank specifically for women.

Robaver persevered through the Depression and World War II, and in 1948 became the Netherlands’ largest bank in when it merged with Incasso Bank, a Dutch institution founded in 1891. The same 1960s bank consolidation movement that produced ABN also swept up Robaver and Amsterdamsche Bank, another Dutch bank founded in the previous century. In 1964, Amsterdamsche Bank and Robaver merged to become the Amsterdam-Rotterdam Bank, or AMRO.

AMRO made a foray into the U.S. market in 1968. In a joint purchase with three other European banks, it bought New York-based European American Bank and Trust Company (EAB). AMRO continued building its retail banking business during the 1970s, and in 1975 acquired Dutch investment bank Pierson, Heldring & Pierson. In the 1980s, AMRO proposed the first sizable cross-border merger in European banking when it made a bid for Belgium’s largest bank, Generale de Banque. But the deal collapsed with both parties citing legal, accounting and cultural difficulties. In the aftermath, AMRO bought Frankfurter Kreditbank, a German industrial bank.

1990: ABN and AMRO Merge

In the late 1980s the Dutch government softened its merger and acquisition laws. The deregulation paved the way for its national banks to pursue global operations and to sidestep takeovers by dominant global banking players in United States, Japan, and Great Britain. As with the banking consolidation frenzy of 1964, ABN and AMRO proved prominent players.

In March 1990, ABN and AMRO—now the two largest commercial banks in the Netherlands—announced their plan to merge. Consolidation promised to strengthen their domestic dominance in the face of increased competition from NMB-Postbank and Rabobank, two other leading Dutch banks. The merger was also expected to create economies of scale in retail bank networks and technology, along with reductions in staff and overlapping businesses. But the merger was not an entirely defensive or a cost-cutting maneuver. Officials at both banks aspired to take advantage of the strong combined capital base and become a global player and bank for the world’s biggest international companies. With European monetary unification on the horizon, the combined companies were especially keen on extending their reach into Europe. Although legal unification was not finalized until September 1991, the banks reached a merger agreement and incorporated in the Netherlands in the summer of 1990. The newfound bank attained instant prominence. ABN AMRO was not only the largest bank in the Netherlands, but also controlled half of the Dutch corporate banking market and two-fifths of securities trading on the Amsterdam Stock Exchange. Outside the country, it ranked as the sixth largest bank in Europe, and one of the top 20 banks in the world. It had combined assets of $233 billion, well exceeding the balance sheet of Citibank, the largest U.S. bank with assets of $214 billion.

To add to its global expansion war chest, ABN AMRO immediately raised $650 million with the sale of preferred stock. However, the new bank first moved to enlarge its markets in the United States rather than advance into Europe. Intent on creating an East Coast financial center to complement its Midwest operations, the bank bought out AMRO’s European American Bank partners in July 1991. It then bolstered its stake in the Midwest the following year. ABN AMRO North America—the new holding company controlling U.S. and Canadian operations—spent $430 million to takeover Talman Home Federal Savings and Loan Association, the largest savings and loan in Illinois.

Integration of the banks proceeded smoothly during the first years following the merger as executives from the partnering banks shared top executive roles. ABN AMRO avoided massive layoffs by managing staff reduction through attrition. In 1993, it merged its two independent Dutch—AMRO-owned Pierson, Heldring & Pierson and ABN-owned Mees & Hope—into a new bank called MeesPierson. MeesPierson remained independent from ABN AMRO, until it was sold to financial conglomerate Fortis Group four years later.

Company Perspectives:

The goal of ABN AMRO is to create value for its clients. The key to our relationship approach is a constant focus on the financial services needs of our chosen client segments. It is through the professionalism and motivation of our staff across the globe that we realize this value. By strict adherence to financial targets these efforts produce maximum economic value for our shareholders. The ABN AMRO Values and Business Principles provide the framework within which we carry out our operations. We operate in three principal customer segments, namely Consumer and Commercial Clients, Wholesale Clients, and Private Clients and Asset Management. The objective is to maximize the value of each of these businesses as well as the synergies between them. Excellence of service to our clients and leadership in our chosen markets are of paramount importance to our long-term success.

1994-1999: CEO Kalff Drives Expansion

Peter Jan Kalff, the banker responsible for the success and growth of ABN’s LaSalle acquisition, became the ABN AMRO chief executive in 1994. Kalff guided the bank through a strong expansion period by adding smaller lending institutions to existing networks, and allowing new properties to operate with considerable autonomy. The LaSalle subsidiary continued to snap up credit, financial, savings and other banking operations during the mid-1990s, merging and remerging companies until in 2000 all operations fell under the LaSalle Bank NA. Kalff also drove the Dutch bank into investment banking and brokerage services. In 1992, ABN AMRO had acquired Hoare Govett, a U.K.-based international corporate investment bank. In 1995 it announced plans to buy the Nordic investment bank Alfred Berg from Sweden’s Volvo group, and also The Chicago Corp, a New York-based securities operation.

In 1996, International Financing Review designated ABN AMRO as the 1995 Bank of the Year for meeting rigorous financial objectives created after the 1991 merger. Yet the year was filled with far more momentous events. In the United States, ABN AMRO made headlines when in late 1996 it agreed to pay US$1.9 billion for Standard Federal Bancorporation of Michigan, a large, profitable mortgage lender with US$15.5 billion in assets and over 180 branches in Michigan, Ohio, and Indiana. The highest price ever paid for a savings and loan, the sale further fortified its Midwest operations and caused ABN AMRO’s stock to soar to a record high of 109.7 guilders. The deal made ABN AMRO the 12th largest bank in the United States. The same year the Dutch bank strengthened its position in Central and Eastern Europe by paying $90 million for a majority interest in Magyar Hitel Bank, Hungary’s fifth largest commercial bank. It then purchased Australian-based Lloyds Bank, with branches in both Australia and New Zealand, for $868 million.

Kalff also pursued out-of-favor banking markets in Latin America and Asia. In 1998, ABN AMRO bought Brazil’s fourth largest public bank, Banco Real, for $2.1 billion and went on to take a controlling interest in Bandepe Bank. It established residential mortgage financing, asset management, and insurance activities in Brazil and five other Latin American and Caribbean countries. The same year it paid $183 million for a 75 percent stake in Thailand’s Bank of Asia, one of the healthier financial institutions in the nation’s struggling banking industry.

Yet ABN AMRO’s plan to establish a borderless, Pan-European bank remained illusive. Nationalistic regulators threw up hurdles regularly. In 1998 the bank looked at creating a second European home market in France by bidding on the French government’s sale of Credit Industriel & Commerical. But French authorities opted instead to sell to a national institution with a lower bid than the Dutch bank’s offer. The scene was repeated later that year when ABN AMRO endeavored to take over Belgium’s Generale de Banque. The Dutch bank countered the $10.7 billion offer made by the Dutch-Belgian Fortis Group, but Generale’s shareholders preferred not to be bought by their Dutch rivals even for more money. Declaring ABN AMRO’s $12.2 billion bid a hostile takeover, Fortis anteed up $13 billion to buy Generale. ABN AMRO finally established a small foothold in a Western European financial center in 1999, taking a 10 percent minority position in Italy’s Banca di Roma. Late in the year it also purchased the Netherlands’ fifth largest mortgage lender, Bouwfounds Nederlandse Gemeenten.

Key Dates:

1824:: Dutch King Willem I creates The Netherlands Trading Society (NTS), parent company of ABN.
1863:: Rotterdamsche Bank (Robaver) is founded and lends funds to Dutch companies operating in Indonesia.
1928:: The progressive Robaver opens Vrouwenbank, a bank specifically for women.
1948:: Robaver merges with Incasso Bank and becomes the Netherlands’ largest bank.
1964:: NTS merges with 100-year-old Dutch agriculture Twentsche Bank forming Algemene Bank Nederland (ABN); and Amsterdamsche Bank and Robaver merge and form the Amsterdam-Rotterdam Bank (AMRO).
1975:: ABN buys Dutch investment banking specialist Mees & Hope Bankiers; AMRO acquires Dutch investment bank Pierson, Heldring & Pierson.
1979:: ABN acquires Chicago-based LaSalle Bank and gains strong foothold in the United States.
1990:: ABN and AMRO, the two largest banks in the Netherlands, agree to merge and form ABN AMRO Bank.
1991:: The merger of ABN and AMRO is completed, and the company acquires Talman Home Federal Savings and Loan Association, the largest savings and loan in Illinois.
1994:: Peter Jan Kalff becomes chief executive.
1995:: International Financing Review designates ABN AMRO as the 1995 Bank of the Year.
1996:: ABN AMRO purchases Standard Federal Bancorporation of Michigan.
1998:: ABN AMRO buys Brazil’s fourth largest public bank, Banco Real.
2000:: ABN AMRO buys commercial bank holding company Michigan National Corporation; and Rijkaman Groenink becomes chairman and chief executive.
2002:: ABN AMRO closes its U.S. investment bank and brokerage businesses; and U.K.-based ABN AMRO Asset Management and Artemis Investment Management merge operating under the Artemis name with ABN AMRO as majority owner.

New Millennium Brings Profit Declines and Restructuring

ABN AMRO’s goal to become a powerful, full-service European bank had failed to materialize by the end of decade, yet the bank had charted considerable success by other measures. At the end of 1999 the bank had logged ten consecutive years of profit growth, with an overall rise of 40.6 percent that year, the highest since the two Dutch banks merged. However, concerns about maintaining profit growth surfaced as ABN AMRO entered the new millennium. Midyear of 2000, it announced a restructuring plan that divided operations into three client-based strategic business units: Consumer and Commercial Clients, Wholesale (Corporate) Clients, and Private Clients and Asset Management. It also outlined a plan to cut costs by closing full-service branches and investing in electronic Internet banking. The bank planned to eliminate about 10 percent, or 2,500 jobs from its Netherlands’ workforce, and close 150 of its 900 branches over the next five years.

Heading up the restructuring was new ABN AMRO chairman and chief executive Rijkaman Groenink, a management board member who replaced the retiring Kalff in May 2000. Analysts depicted Groenink as more aggressive than his predecessor, and in the fall of 2000 two significant acquisitions were underway. The bank agreed to pay $825 million for New York-based Allegheny Asset Management. The move was an effort to remedy ABN AMRO’s slim asset management business and lack of European investment channels to supplement underfunded government pensions. Allegheny managed about $45 billion in assets and the acquisition increased the bank’s global assets under management to $155 billion. A month later ABN AMRO struck an agreement with National Australia Bank to buy U.S. commercial bank holding company Michigan National Corporation, based in Farmington Hills, Michigan. The $2.75 billion deal was again intended to bolster the Dutch bank’s already solid banking franchise in the Midwest. Michigan National Corporation had assets amounting to $11.6 billion and its primary subsidiary, Michigan National Bank had 3,600 employees and 184 branches. ABN AMRO merged the bank with its Standard Federal holding.

Groenink painted a fuller picture of the changes coming later in the year when he reported a 21 percent decline in the bank’s second-quarter profit for 2001. He said that ABN AMRO would not only monitor the growth of its corporate and investment banking but also look for a merger or an alliance, with Fortis as a possible candidate. Meanwhile, the bank continued to adjust its holdings to help cut costs and improve profits. To finance the acquisition of Allegheny and Michigan National, and focus exclusively on the Midwest, ABN AMRO sold New-York based European American Bank (EAB) to Citibank for $1.6 billion. It also reached agreement with Dutch rival ING Group to purchase the North American brokerage, corporate finance, domestic equities, and futures and options businesses of subsidiary ING Barings for $275 million. Late in the year the bank began divesting global units outside its home markets and business focus. Bank operations were sold in Sri Lanka, Morocco, Panama, Argentina, Kenya, Bahrain, Malaysia, the Philippines, and elsewhere. Yet the sluggish economy and terrorist attacks on the United States in September 2001 combined to produce disappointing year-end results. Revenues for 2001 rose only 2 percent to $16.8 billion (EUR 18.8 billion) and net profits dropped 24 percent to $2.8 billion (EUR 2.4 billion) excluding the sale of European American Bank and restructuring charges.

Refocusing on Retail Banking

In 2002, the pullback in securities and investment banking business outside Europe continued. Only a year after acquiring ING Barings, ABN AMRO decided to close its U.S. equities and corporate finance operations in the United States, cutting 550 trading, research and back-office jobs. Analysts estimated these operations were losing $100 million a year, and bank officials admitted their U.S. operations were too small and weak to compete with the larger Wall Street firms. Meanwhile, bank closures in the Netherlands continued to move ahead with an announcement that it would shut down 250 more branches in the Netherlands by the year’s end. The bank’s assets management business suffered a blow after two of its high-profile fund managers left to work for a rival firm, but recovered to a degree when ABN AMRO Asset Management and Artemis Investment Management, both located in the United Kingdom, agreed to merge. The enlarged business operated under the Artemis name, but ABN AMRO maintained majority ownership.

A slow economy and ambitions to compete in U.S. corporate and investment banking caused ABN AMRO to stumble in the first years of the new millennium. Analysts praised the retreat from the U.S. markets, believing the Dutch bank was better suited to building securities and corporate brokerage business in Europe and Asia. ABN AMRO executives seemed to agree that a transition back to the profitable retail and commercial banking it was most familiar with made sense in the near term.

Principal Subsidiaries

ABN AMRO Asset Management Ltd.; ABN AMRO Bank NV; ABN AMRO Bouwfonds Nederlandse Gemeenten NV (50%); ABN AMRO Lease Holding NV; ABN AMRO North America, Inc.; Banco ABN AMRO Real SA (88%); LaSalle Bank NA; LaSalle National Corporation; Standard Federal Bancorporation.

Principal Competitors

Deutsche Bank; ING; Societe Generale; Credit Suisse; HypoVereinsbank.

ABN AMRO Holding, N.V.

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ABN AMRO Holding, N.V.

Gustav Mahlerlaan 10
1082 PP Amsterdam
The Netherlands
Telephone: (31) 20-628-9393
Fax: (31) 20-629-9111
Web site: http://www.abnamro.com

Holland’s King Launches ABN in 1824

AMRO Is Born in Rotterdam: 1863

1990: ABN and AMRO Merge

Company Perspectives:

1994-1999: CEO Kalff Drives Expansion

Key Dates:

1824:: Dutch King Willem I creates The Netherlands Trading Society (NTS), parent company of ABN.
1863:: Rotterdamsche Bank (Robaver) is founded and lends funds to Dutch companies operating in Indonesia.
1928:: The progressive Robaver opens Vrouwenbank, a bank specifically for women.
1948:: Robaver merges with Incasso Bank and becomes the Netherlands’ largest bank.
1964:: NTS merges with 100-year-old Dutch agriculture Twentsche Bank forming Algemene Bank Nederland (ABN); and Amsterdamsche Bank and Robaver merge and form the Amsterdam-Rotterdam Bank (AMRO).
1975:: ABN buys Dutch investment banking specialist Mees & Hope Bankiers; AMRO acquires Dutch investment bank Pierson, Heldring & Pierson.
1979:: ABN acquires Chicago-based LaSalle Bank and gains strong foothold in the United States.
1990:: ABN and AMRO, the two largest banks in the Netherlands, agree to merge and form ABN AMRO Bank.
1991:: The merger of ABN and AMRO is completed, and the company acquires Talman Home Federal Savings and Loan Association, the largest savings and loan in Illinois.
1994:: Peter Jan Kalff becomes chief executive.
1995:: International Financing Review designates ABN AMRO as the 1995 Bank of the Year.
1996:: ABN AMRO purchases Standard Federal Bancorporation of Michigan.
1998:: ABN AMRO buys Brazil’s fourth largest public bank, Banco Real.
2000:: ABN AMRO buys commercial bank holding company Michigan National Corporation; and Rijkaman Groenink becomes chairman and chief executive.
2002:: ABN AMRO closes its U.S. investment bank and brokerage businesses; and U.K.-based ABN AMRO Asset Management and Artemis Investment Management merge operating under the Artemis name with ABN AMRO as majority owner.