This publication recently met with the private banking arm of ABN AMRO in Frankfurt to talk about its ambitions.

ABN AMRO hopes that when the Dutch government gives the green light for the state-owned bank to be returned to the private sector – possibly next year - that the firm’s private banking arm plays a significant role in driving revenue and profits.

Just over five weeks after the group’s German private banking business Bethmann finally took over the onshore German private banking arm of Credit Suisse, executives were in confident mood about how ABN AMRO now counts as one of the largest wealth management players in Germany and the Continent, with a growing presence elsewhere as well.

In Germany, Europe’s biggest economy, Bethmann bought a business propelling it into being the third largest bank in the country by AuM (€34 billion ($43.1 billion)), second only to Commerzbank (€48 billion) and Deutsche Bank (€133 billion). At a time when consolidation talk is de rigeur, and there is a focus on the need to build scale to cope with regulatory and other costs, the benefits of such a move are clear.

“To be a credible private bank today you have to have critical mass,” Jeroen Rijpkema, chief executive of ABN AMRO’s international private bank, told this publication and a selection of other journalists at Bethmann’s Frankfurt headquarters.

“We decided a few years ago to have a clear focus on selective markets and domestic markets. We consider Germany, the Netherlands and France to be domestic markets for us; and we have good positions in Luxembourg and Belgium,” he said.

With €176 billion of client assets in total (of which €86 billion is in the Netherlands), the private banking arm of this firm is one of the world’s largest; but while the ABN AMRO brand remains across its network of businesses, those firms retain their distinctive local identity, Rijpkema said. Bethmann, a bank with a history dating back to 1712, hasn’t seen any dilution of its brand. ABN AMRO’s other private banking firms are Neuflize OBC in France and ABN AMRO MeesPierson in the Netherlands. There are presences in Hong Kong, Singapore, Dubai, Spain (World Citizen Services) and The Channel Islands.

In the first half of 2014, the bank logged a net profit of €100 million, on course to beat its €136 million result for all of 2013; it now accounts for around 16 per cent of group operating income. “For a universal bank, that is a sizeable activity,” Rijpkema said.

Ambitions
Rijpkema talked about how he wants the private banking arm of ABN AMRO to be “multi-domestic and multi-brand”, while also keeping a tight focus on specific markets where the bank can win clients. That has also meant pulling out of markets, or reducing activity, to keep the group structure simple and efficient. For example, ABN AMRO has divested from Monaco (2006); Miami and Uruguay (2007); London and Gibraltar (2008), Switzerland (2011) and more recently in 2013, Curacao.

On the other hand, integrations and acquisitions have included Banque NSM & Banque OBC in 2006, the integration with MeesPierson in 2010; the acquisition of LGT Germany in 2011, and of course, the Credit Suisse transaction that completed a few weeks ago.

For next year, Rijpkema said the aim is for the overall international business to contribute 20 to 25 per cent of the firm’s revenues, up from 17 per cent in 2013.

At present, the private banking arm has a total cost/income ratio of around 76 per cent. Over the medium term, the bank aims at around 70 per cent, although occasional spending and other transactions might keep the ratio higher from time to time, Rijpkema said.

“It is a balance with your level of investment and what kind of opportunities you have…the kind of opportunity we had with Credit Suisse might temporarily affect that sort of [cost/income ratio target] ambition,” he continued. “I think this sort of target is achievable and not unmissable,” he said. (Across the whole of the Dutch banking group, the ratio is 65 per cent.)

Ahead of any rule changes that might come in Germany or elsewhere, the private banking business offers clients all-in fees and gives complete transparency over charges – there are no hidden fees, Rijpkema said.

Germany
Becoming a top-three private bank in Germany clearly is a big source of pride – but not complacency, Horst Schmidt, CEO of Bethmann Bank and country executive for ABN AMRO in Germany, said in the same interview.

With its current AuM figure, Schmidt said that Bethmann is comfortably ahead of where it needs to be in scale terms to operate as a sustainable and profitable business.

Asked how Bethmann approaches issues such as client segmentation, Schmidt said their firm has a broad range of clients and disliked the term “segmentation” as it could sound as if the firm operated liked a factory. “That’s not how we look at it – we think more of segmentation of offerings rather than of the client.”

“Private banking is a premium business, a quality business….there are dangers in making it too easy to segment people,” he said.

One concern is that the private banking sector is currently facing heavy regulatory requirements and these rules, such as complexities around anti-money laundering rules, were not always appreciated by the client, Schmidt said, although technology can make the experience less vexatious, he said.

Asked about how the Credit Suisse acquisition has gone, Schmidt said that one benefit to Bethmann was that it did not need to make that deal as it already enjoyed scale efficiencies. There hasn’t had to be a lot of painful restructuring, he said. “It also makes us the biggest player in Hamburg, Munich and Frankfurt,” he said.

“The reaction of customers [of the Credit Suisse business] has been extremely positive,” Schmidt said. In most M&A deals, a client attrition rate of 30 per cent can be expected but it has been less than that with the Credit Suisse deal. This is particularly gratifying as there was a period of over eight months between the initial agreement to buy the German onshore business of Credit Suisse and the deal’s completion.

Asked if he had expected Credit Suisse to withdraw from the onshore German market, Schmidt said: “No, never.”