ABN Amro concentrates on quality over quantity

While much of the talk among employees at ABN Amro headquarters in the bleak, built-up business district next to Amsterdam Zuid railway station is about the bank’s forthcoming IPO, the head of the Dutch institution’s private banking arm tries to play down the excitement at head office.

“The IPO is important for everyone, but it is not influencing our group strategy or our private banking strategy,” says 55 year-old Jeroen Rijpkema, CEO of Private Banking International, who oversaw massive inflows of $6.1bn (€5.3bn) during 2014, nudging total assets to more than $206bn.

“We laid down a clear strategy a few years ago focused on building skill in a number of geographies, to be meaningful and relevant for clients,” says the smooth-sounding ABN veteran of more than 30 years, referring to private banking ambitions in the Netherlands, Germany, France and neighbouring countries, plus a growing business in the Middle East and Asia.

The plan is to build separate services in these jurisdictions, united by a combined central investment capacity, technology and compliance machine.

“We plan to pursue this strategy irrespective of the ownership of the organisation,” says the Stanford University Business School-educated banker keen on highlighting “skill” and “sustainable performance”.

Target Markets

Despite previous flirtations with London’s booming wealth hub, ABN Amro already has some big, semi-grilled fish to fry, rather than creating new recipes, he says, preferring to sit out an enticing UK showdown between domestic and foreign players including Barclays, Coutts, Investec and SocGen.

“We do not have the skill there to be relevant,” he confesses. “And I am not in the position to build that skill, when I have other markets where I already have the opportunity to strengthen that skill. We need to focus, so that we can create success for our private clients. We do not have a distinctive proposition to reach a lead position in such a competitive market. So in Europe, we prefer to focus on France, Germany, Belgium and the Netherlands.”

Where he does believe the skill and proposition exist, ABN Amro will continue to increase resources and provide back-up in clearing, corporate banking and services in the ECT (energy, commodities and transportation) sphere to private banking clients.

One of the key target geographies to tick all boxes is Germany, where ABN’s Bethmann bank franchise has succeeded in acquiring assets from LGT and Credit Suisse during the last three years to become the country’s third largest private banking player, narrowing the gap behind domestic institutions.

“Acquiring is one factor, but can you deliver on your promises,” asks Mr Rijpkema. “Can you persuade and convince staff and clients to join a new organisation? We proved with the Credit Suisse acquisition that we are able to do so.”

France has also been an important battleground for the bank’s Neuflize brand, serving an entrepreneurial client base, if a slightly older one than in neighbouring markets.

Not only has Neuflize’s Paris-based fund selection service been leveraged for use across the group, but its Babyloan platform for credit supplied to businesses in developing countries is also being considered for adaptation to other geographies.

Currently more than 85 per cent of the firm’s total private banking assets are in North West Europe, but Asia and the Middle East are seen as worthwhile growth markets, with bank insiders claiming the post-IPO expansion climate will help prove developing markets are no longer an “experiment” for the Dutch bank.

As well as those cross-border clients who have been using the bank’s facilities in Hong Kong, Singapore and Dubai “for decades”, an increasing number of domestic customers are also knocking on ABN Amro’s doors in Asia, says Mr Rijpkema.

But a key factor in growth markets is sustainability, and there is a marked wariness about over-expansion in developing countries at ABN headquarters. “We will not pursue any huge organic growth programmes, as we run the risk of markets turning sour and having to adjust or reverse those plans,” warns the boss of 3,000 employees across the world.

The pursuit of growth in Asia will be much more guarded and gradual than the gung-ho approaches of some Swiss competitors. “The future will prove which is the most successful strategy,” smiles the measured Mr Rijpkema. “You will not hear me announce the hiring of hundreds of RMs [relationship managers], who by the way are not even available. We will do it more gradually.”

Although he recently announced a doubling in Asian private bankers from 100 to 200 in the near term, he insists that this is coming from a low base, so it is by no means a dramatic gesture.

Currently, he has 150 on the books in Hong Kong and Singapore and will “gradually grow that number” in those two hubs, with no intention to put down roots in other cities. New hires will be limited to “tens of people, certainly not in the hundreds”.

The Asian experience also reflects the strategy closer to home, in that ABN Amro has transformed its operation from offshore to onshore private banking. “Well above 80 per cent of our asset base comes from domestic clients,” he affirms. “Most leading private banks are cross-border private banks, but we want to be a leading domestic private bank in various countries, with a multi-brand strategy.”

This is a massive differentiation when compared with competitors, believes Mr Rijpkema. “We have a deliberate strategy to be in four, five or six markets, with a different domestic focus for each one.”

This strategy has been honed during the last five years, with the bank pulling back from a previously much wider presence in jurisdictions such as the UK, Switzerland, Monaco, Gibraltar and Curacao. “We have migrated those franchises to more natural owners and instead accelerated our presence in countries like Germany. It’s all about skill and ensuring you are relevant to clients.”

Swiss operations

The bank’s downgrading of Switzerland as a hub for wealth management has coincided with a regulatory and tax onslaught on the country from authorities in the US and neighbouring European countries. 

The restrictions on state-owned banks to acquire other businesses – soon to be lifted after the planned IPO – also held ABN Amro back from achieving scale in some markets, he suggests.

But Mr Rijpkema, who maintains direct control of the Swiss banking operation, puts theses changes down ultimately to client needs.

“Switzerland is a leading financial centre for private banking, but like any other location, you need a critical mass to make sure you are relevant to clients,” he says. “The size we had in Switzerland was not large enough in the longer term to handle the challenges and service the clients.”     

Keeping relationship managers grounded

While a strong believer in educating relationship managers and encouraging them to seize business opportunities, an always cautious Mr Rijpkema is adamant that his bankers should not over-reach themselves.

Any plans for them to popularise more complex institutional strategies such as smart beta or factor-based investments are currently on the back-burner, he says.

“I do not see a strong driver for offerings like smart beta,” he says, believing that rather than spreading themselves too thinly, bankers must work on sharpening knowledge of existing bread-and-butter strategies.

For requirements of today’s clients, these do however include both sustainable investing and philanthropy services. “We need to be meaningful for clients,” he stresses. “If we are not able to offer [sustainable investments and philanthropy], quite a number of clients would not feel happy with our services and they might make other choices.”

Availability of these new-age services and bankers’ expertise in providing them is not the only reason clients might prefer ABN Amro to a competitor, but it ranks alongside liquidity, professionalism and long-term investment views in their thinking. 

Socially responsible investment is a particularly important driver in some countries such as Germany, he says. “If you did not have it, it would discourage a number of clients.”

ABN Amro won best private bank in the Netherlands and were highly commended for Europe in 2015’s Global Private Banking Awards