Wednesday 10th February 2016
NEWS TICKER: Greek Prime Minister Alexis Tsipras has called a ministerial meeting this morning to discuss the latest key domestic developments including the open issues whose implementation is required for the completion of the 1st programme review as well as farmers’ escalating protests against the planned overhaul of the income tax and the social security pension system, says Eurobank in Athens. Minister of Finance Euclid Tsakalotos warned earlier this week that the programme review should conclude by the end of February noting that Greece will be “in trouble” if it carries on into May-June - India’s Power, coal and renewable energy minister Piyush Goyal yesterday offered a $1trn prize to Australian power and energy firms to come and invest in the country’s power sector. Goyal's pitch comes as the government is pegging economic growth at 7.3% for Q4 2015, marking a slight drop on previous quarters but still outpacing China. Goyal says India's power sector is at an inflection point as the Modi government is focusing on structural reforms with an integrated outlook for the energy sector – Tomorrow (February 11th), the Latvian parliament (Saeima) will hold a vote of confidence on the new composition of the Cabinet of Ministers set up by incoming premier Māris Kučinskis. The first ceremonial sitting of the new government will be held tomorrow at 15.00 in the Green Hall of the Cabinet of Ministers. Ināra Mūrniece, acting president and speaker of the Saeima will also participate in the sitting - freemarketFX, the currency exchange, has appointed services veteran Rich Ricci as Chairman. Formerly CEO of Barclays Corporate and Investment Banking - JP Morgan Asset Management has appointed Paul Farrell as head of UK Institutional Clients. Based in London, Farrell will join JPMAM in April and will report to Patrick Thomson, head of International Institutional Clients. Farrell will be responsible for leading the sales team that manages and builds client relationships with Institutional Pension Funds in the UK & Ireland. He will have responsibility for direct client relationship management in the defined benefit as well as business development in the defined contribution marketplace and will work closely with our consultant client team led by Karen Roberton. Farrell joins most recently from Dimensional Fund Advisors, where he served as Head of UK Institutional Clients and was responsible for new business development, client service and consultant relations. Before that he was head of UK Strategic Clients at BlackRock - Vistra Group, a provider of fund admin services, has bought UK-based business expansion services provider Nortons Group, the accounting and advisory service. The Nortons team, led by Andrew Norton and Pete Doyle, is joining the Vistra Group to boost their existing range of services and benefit from Vistra’s global reach. Martin Crawford, CEO of Vistra Group, says: “Offering support services to companies moving abroad is a core business for Vistra and of growing importance. Nortons has the expertise, the experienced staff, and the network to add significant value to this service line. We are very proud to welcome Andrew Norton, Pete Doyle, and their colleagues to our international team and look forward to expanding our global reach with their experience and leadership". The acquisition of Nortons is expected to complete by the end of February and will take the combined headcount of the Vistra Group, inclusive of the soon to be merged Orangefield Group, to over 2,200 staff in 39 countries - Asian markets had another tough day. Japan's Nikkei Stock Average fell 2.3% to its lowest closing level since late 2014, and reaffirming a trend across the last few months the yen remained near its strongest level against the dollar in over a year. Despite the Bank of Japan's decision last month to introduce negative interest rates, a policy that tends to weaken the local currency, the yen has strengthened in recent sessions to levels not seen since 2014. The Japanese 10-year treasury yield traded shortly in negative territory, and touched -0.08%, before stabilising above the neutral mark. The dollar was last up 0.1% against the yen at ¥ 115.00. Australia's S&P ASX 200 fell 1.2%, the downward drift being led by energy stocks. The Australian Dollar consolidated yesterday’s gains and is currently testing the next resistance, which lies at $0.71. AUD/USD up 0.21 in local trading. Other Asian currencies did well today against the dollar. The South Korean won rose 0.74%, the Taiwanese dollar edged up 0.60%, while the Indian rupiah climbed 1.05%. That uptick was not reflected in equity markets. The Topix index slid 3.02%. In Singapore the STI slipped 2.14%, while New Zealand equities were down 0.85% respectively. China's markets are still closed for the Lunar New Year holidays – The story today is all about Federal Reserve chair Janet Yellen’s testimony to the US Congress. Analysts say that the market is pricing in no further rate increases in the near future and given the volatility in the markets and the general air of panic right now among investors, it would be a catastrophic move for the Fed to raise interest rates even a quantum in coming months. Truth is that no matter how well Yellen paints the US economy is it a story of two halves: yes, job numbers are rising, but there looks to be a lot of slack in the overall economy and this is contributing to a gradual weakening of the US dollar (but not against the euro). In fact, Europe is making the US look good; hence the wild swings in investor sentiment. Still, bank stocks look to remain vulnerable for the remainder of the quarter. This week's economic calendar is light; hence the focus on the Fed. The other bit of advanced market news is that expectations are rising for a rate cut by Norges Bank. Emerging market currencies are broadly trading higher this morning. The South African rand rose 0.85% against the US dollar, with USD/ZAR back below the 16.0 mark at around 15.9350. The Russian ruble also took advantage of this respite and gained 0.65% versus the greenback, which helped USD/RUB to edge lower to 79.10. In terms of data, watch out for industrial and manufacturing production figures from France, the UK and Italy and CPI data from Denmark and Norway - In commodities, Brent crude oil was last up 2.4% at $31.05 a barrel in thin trade on speculation about possible production cuts, but remains down nearly 9% for the week and roughly 19% for the year. Peter Rosenstreich, head of market strategy at Swissquote Bank explains, "Crude oil has been able to rebound off the 12-year low ($27.78) after falling sharply by nearly 8% on Tuesday. The positive catalyst was the news that Iran has indicated that they would be willing to work with Saudi Arabia on production limits. However, markets remain sceptical of this or any coordinated production cuts. There seems to be no relief on selling pressure in sight as the US government released reports indicating that demand will remain soft by lower demand growth forecasts. In addition, the Paris based International Energy Agency (IEA) has warned that the supply glut will continue through 2016 as production cuts have been made at a slower pace than forecasted.” In other market news this morning, spot gold in London was down 0.2% at $1188.05 an ounce, while three-month copper futures on the London Metal Exchange fell 0.7% to $4,463 a ton.

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20-20: Can ABN AMRO stake a comeback claim?

Thursday, 15 December 2011
20-20: Can ABN AMRO stake a comeback claim? It was never going to be simple but chief executive officer Gerrit Zalm had been making steady progress in turning round beleaguered ABN AMRO. The year 2011 started out promising with a strong first half but the eurozone crisis has put a question mark over whether it will return to the public markets by 2014. Despite the uncertainty, Zalm is seen as heading in the right direction. Lynn Strongin Dodds reports on the outlook for the bank. http://www.ftseglobalmarkets.com/

It was never going to be simple but chief executive officer Gerrit Zalm had been making steady progress in turning round beleaguered ABN AMRO. The year 2011 started out promising with a strong first half but the eurozone crisis has put a question mark over whether it will return to the public markets by 2014. Despite the uncertainty, Zalm is seen as heading in the right direction. Lynn Strongin Dodds reports on the outlook for the bank.

ABN AMRO’S fall from grace has been well-documented. The bank had become the symbol of the financial hubris of the pre-Lehman days with its fast past growth, high-profile takeovers and subsequent collapse. By 2007, ABN AMRO was the second-largest bank in the Netherlands and the eighth largest bank in Europe by assets. It had operations in 63 countries, with more than 110,000 employees and almost $63.9bn in revenue.  

The moniker was set to disappear when Royal Bank of Scotland, Fortis and Santander split up its international assets between them in a €72bn deal that was ranked as the world’s largest banking takeover. The financial crisis exploded a year later and the Dutch government was forced to step in to rescue not only the domestic assets of ABN AMRO but also Fortis, at a cost of some €27bn.



The two banks were subsequently merged under the ABN AMRO name and Zalm, a former finance minister who earned a reputation as a fiscal hawk, was called in as chief executive in 2009 to oversee the integration.

His task is to get the bank’s income ratio structurally below 60% and to lay the foundation for a public listing in three years’ time. To this end, Zalm has been busy cutting the workforce by about 9%, bolstering key business lines and resurrecting its energy, commodities and transportation (ECT) operations. It had sold its ECT business to Fortis in 1997 and so it is back in the fold.

Integration is still under way and the goals include improving cost efficiency, rebuilding the bank’s franchise in commercial banking and increasing market share lost in the Netherlands. Zalm is also carefully developing an international presence in the bank’s core competencies such as ECT. It has re-established a foothold in the US oil and gas market by opening an office in Dallas, staffed by a six-person team it lured away from UBS. Moscow and Shanghai are also on the list as cities where it would like to re-establish a presence.

Zalm has also returned the brand to the Dutch high street; a move which, says Claudia Nelson, senior director of Fitch, plays to the bank’s strengths. The combined entity is now the third-largest domestic bank behind rivals Robeco and ING with a market share of 15% to 25% depending on the product line, involving some 6.8m customers.

Zalm has also strengthened the private banking franchise via the respected AMRO MeesPierson brand. The bank targets customers with wealth in excess of €1m and holds around €165bn of assets under management split equally between ABN AMRO, MeesPierson and a widely spread international network. The division is also known for its global diamonds and jewellery group, which specialises in providing lending, cash management, merchant banking and transaction banking services to small and medium enterprises in the industry. Zalm is a master of detail, evinced in his product diversification strategy: he has, for instance, introduced a special service for entrepreneurs both as a private individual and as a representative of their enterprise; while ABN AMRO MeesPierson has created a dedicated service advising a wide range of non-profit organisations.

Analysts remain optimistic about the bank’s prospects on the home front, but they are more circumspect about its global ambitions in the energy sector. The general consensus is that ABN AMRO could have difficulty in competing against French banks such as Société Générale and BNP Paribas, which have a lock on the field in Europe. In fact, ABN AMRO’s former energy team ended up at BNP Paribas after it took over part of Fortis during the demerger.  

Analysts though are encouraged that Zalm appears on track to deliver the bank back to the public markets by 2014. The first-half results in 2011 show net profits of €974m compared to €325m in the same period in 2010 while its core tier-one capital ratio was 11.4%. The cost structure had also been whittled down with expenses dropping to 63% from 75% a year ago.

With the eurozone crisis rumbling in the background, the bank’s third-quarter results showed it had taken a battering as profits were almost erased by a €500m writedown on Greek corporate loans. “Uncertainty as a result of the sovereign-debt crisis, and the impact thereof on the European economy, caused us to impair part of the €1bn Greek government-guaranteed corporate exposures,” Zalm noted at the time.

Nelson says: “It is difficult to know what will happen because all banks in the eurozone will be affected. However, there has been some investor appetite for the Netherlands and there is still scope for ABN AMRO to continue to build up its business.”

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