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ABN
AMRO Bank N.V.
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Second
Quarter Results 2007
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Operator:
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Good
afternoon ladies and gentlemen. Welcome to the ABN AMRO Second
Quarter
Results 2007 Presentation. At this time all participants are in
a listen-only mode. Later we will conduct a question and answer
session. I would now like to turn the call over to your host,
Mr. Rijkman Groenink.
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Huibert
Boumeester:
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What
we’re
going to discuss with you, of course, is first half ’07
results. We will be joined shortly by Rijkman Groenink. To
start to the discussion perhaps is around the operating
performance. We have a very select audience here, I
hope. We are joined in the webcast, but we still have, it
remains select.
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Male
Speaker:
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(Inaudible)…
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Huibert
Boumeester:
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I
have to
really plead guilty as well this morning, so I think we just
(inaudible). The first thing that we would like to note is from
the operating results in the first half of ’07 is that they show a pretty
strong performance in conditions, of course, of
uncertainties. We’re going to first discuss those and then I
would like to take you through the year of delivery discussion
and then
Rijkman will address the strategic options explored section. If
you have any questions as we go along, please do ask and I will
try to
answer them.
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The
first half
results of ’07 show a strong performance; and why do we say
that? The reported revenue growth is 12.6% when adjusted; and,
of course, we have adjusted for a number of items that you can
see
footnoted on the bottom of the page is actually 14.3% which has
been
driven by increase in operating income in all BUs.
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We
have, of
course, seen a strong underlying performance in the BU global
markets. We had also seen, on a reported basis, expenses went
up 14% but when adjusted at 8.6%, of course, leading to well
below cost
growth relative to revenues leading to very significant increases
in
reportings.
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Operating
result of 9.1%, but particularly up 29.1% (inaudible) of the
adjusted
operating results.
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That,
again,
in turn then leads to a 3.6 percentage point improvement in the
adjusted
efficiency ratio to 68.5% for the first half. That in turn, of
course, leads to a reported profit which is marginally down of
1.4%, but
on an adjusted basis is up 13.4% to EUR 2.39 billion and that
is despite
higher taxes and loan loss impairments and as a result obviously
of some
of the BUs, I had already alluded to, but also Asia, Latin America,
and
Europe; and
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| we see indeed that the markets business unit has led the further driving of increased operating profit significantly. | ||
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That’s
where I
would like to start sort of finish the first summary of the result.
Of
course there is a comparison that we’ve made core queue on queue, but we
remain, as we’ve said, well on track to beat the 2007 EPS target of EUR
2.3 on an adjusted basis. We do that from a position of capital
strength, 6.12 (inaudible) one and an 8.17 tier 1 ratio and therefore
we
feel that in the right combination of caution and, of course,
reflecting
the improved earnings that we’re able to pay a dividend of $0.58 which is
up 5.5%, so far the general and sort of statement on the first
half
results.
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The
next slide
shows that depicted, and I’m happy to come back to this EPS discussion
should you want to, but it’s clear from these numbers that we are well
positioned to deliver on an EPS basis.
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If
you look at
the adjusted revenue growth by 14.3%, which has been driven by
higher
revenues on BUs, of course, you can see with the exclusion, of
course, of
our group functions BU, contributions from all BUs, or be it
that some BUs
have seen a marked improvement in terms of revenue
growth. Notable, as I said earlier, are the business unit
Europe, Latin America, and Asia; and if you look at the light
yellow boxes
you can see the contribution and growth in contribution from
the global
markets set of products is quite significant as well, supported
by robust
growth of global clients.
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Are
our costs
under control? We would say “yes” because the adjusted
expenses, excluding bonus accruals are up by only 1.5% year-on-year.
This
is in our view is a result of cost measures we’ve taken in 2006 and
further savings from services.
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If
you look at
the adjusted operating result that flows through from all of
this, you can
see that the picture is slightly more mixed but generally on
the same
trend line for the different BUs. Antonventa has not quite been
able to keep up its operating result, but all the other BUs have
been able
to (inaudible) group functions.
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The
efficiency
ratio improvement we would say is therefore rather dramatic with
a 3.6
improvement in the efficiency ratio, a very solid result delivered,
as I
said earlier, based on our measures taken in 2006 and on our
efforts on
the services side. If you translate that to the adjusted
efficiency ratios by BU, it translates therefore an improved
efficiency
ratio in almost BUs, some by significant margin, as you can see,
in the
business unit, Europe and also in the business Europe, business
unit,
excuse me, North America.
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Provisioning,
I think it’s well within the expectations generally. Provisions
growth has been there in the Netherlands as a result of some
corporate
provisions we’ve taken, hardly any provisions in the portfolio of Europe,
some provisions in Antonventa, and we’ll come back to that as to what that
means for the rest of the year, and
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| basically we see all the significant growth for provisions in the business units that are subject and leaders of growth, namely the business units – Latin America and the business unit Asia both representing provisions that are accumulated as a result of very significant growth of the balance sheet. | ||
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All
of this
means that on a temporary basis our group ROE is below 20%; however,
our
return on assigned risk capital of all our operating BUs, almost
all, I
should say, (inaudible) Antonventa is about 20% by a significant
margin in
certain cases. Also our global clients unit has been able to
achieve for the first time return on assigned risk capital which
is above
20% at 22%.
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We
had shared
with our designs and deliverables for 2007 at the publication
of the
annual results for ’06 and indicted how we were going to go about it even
earlier, very much based on improving our operating performance,
increasing focus and capital discipline.
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On
the growth
side, I would like to share with you, for instance, some numbers
on our
total retail loans growth. You might note that there’s been
significant and continuous growth in that area since the early
part of
’04. The retail growth over the period, over the one-year period
is
31.2%. This is still done, I think, at very appropriate risk
levels and risk costs. Expenses are up but by no means at the
same level, which has led to an improvement in our efficiency
ratio in
Latin America, which is 95%. Brazil, as I’m sure you’re all
aware, we are approaching the same performance as our peers. In
the BU Asia we’ve seen strong operating income increases by
38%. We have started to drive our home our focus on selected
markets – India, Greater China, UAE, Indonesia, and
Pakistan. You’ve seen us making some minor acquisitions in both
Pakistan and Indonesia and those are in the progress of being
prepared for
integration. In June we also received approval to go local and
to build our bank further in China proper.
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Antonventa
has
been, of course, some disappointment to us, particularly the
growth of
operating income as you can see at a level of 1.9% does not fully
reflect
both the conditions in the Italian marketplace and our aspirations
for
Antonventa. We have made significant further investments in the
client base and we have also taken other actions to attract new
customers. If you look at that, we have to, of course, say that
it is uncertain whether Antonventa will continue to meet it’s 500 million
euro targeted profit for the period on a stand-alone basis, but
we
certainly are confident that this will be higher than the profit
for the
period in ’06 which was EUR 413 million. We have undertaken
significant initiatives and therefore do expect that profit to
pickup, but
it hasn’t picked up as quickly as we had hoped in
Antonventa.
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On
the
efficiency side you can see the primary views where we were focusing
on
efficiency, apart from the BU Europe, the BU NL, and the NU North
America
we’ve seen that the BU NL is on track to deliver improvement of
efficiency
ratio in ’07, seen a good
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AMRO Bank N.V.
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2007
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| improvement of operating income in the first half, good volume growth in commercial loans, however some lower margins; and we’ve also seen good cost control and we’ve seen some benefits from the additional services savings leading to an efficiency ratio of 65.6 for the first half of ’07 and that’s quite a ways since where we were, of course, at the beginning of 2001. If you look at the movement in efficiency ratios with LaSalle, there we also saw operating income up at constant effect rates, of course, the U.S. dollar has gone on a bit. We saw the operating expenses up. Of course, we have made some higher bonds accruals to pay for performance and costs up by 5.2%, which has allowed us to benefit some already from the successful execution of cost measures and you might have note that we have executed our 5% head count reduction during the course of the first two quarters of this year. | ||
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Finally,
as
part of our plan, we wanted to accelerate our steps to make sure
that BU
Europe reached profitability in 2007. We have taken, had taken,
and have taken certain actions to make sure that this would
happen. Significant cost control, FDU reduction and service
initiatives helped us. We also made sure that we pushed ahead
on the shift in client mix with a further focus on financial
institutions
which has led to a very significant increase in revenues for
the BU
Europe, which combined with the cost measures we’ve taken has now led to a
profitable unit delivering for the period 243 million
euros.
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We’ve
also
seen a similar over the last three years strong improvement in
the
efficiency ratio of the BU global markets. Global markets were
able to record revenues at levels which have not seen before
and driven
really by momentum across franchise. Growth has been and will
continue to be supported by tight ongoing cost control and as
a
consequence of all of this on a like-for-like basis profit for
a period
increased by 76.3% to euro 730 million the first half of ’07, a
significant improvement both in profitability, efficiency ratio,
and
capital returns.
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Global
clients, we had said that global clients needed transition itself
to
making better use of its capital, restricting its access to capital,
and
seeing more fees and commissions as revenue base. Revenues did
increase by
29.4% to 1.5 billion in the first half of ’07. We also saw an
increase in revenues, in fact a strong ECM/M&A results and the sale of
non-capital intensive global markets products that has led to
a
significant improvement of the efficiency ratio and finally a
very solid
return on assigned risk capital.
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Focus:
Over
the last four years, five years, I should say, since 2001 we
have divested
ourselves of a significant number, approximately 40 subscale
and non-core
assets. Of course, you are very familiar with a number of them
– LeasePlan, Bouwfonds, U.S. mortgages. We continue to divest
smaller units from within business units such as our private
clients
business in Miami and our 50% stake in a joint venture with ABN
AMRO
Mellon, which will only be reflected in the third quarter numbers.
We’ve
obviously also after a long
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ABN
AMRO Bank N.V.
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Second
Quarter Results 2007
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| consideration and taking opportune use of price and moment disposed of LaSalle and reduced our footprint. Combined with this we had over the last couple years made selective acquisitions and we have an ongoing commitment to manage our capital tightly and this will led to a few very small, small portfolio disposals, but we have no intention of making major disposals at the current time. | ||
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I
already
alluded to the strict capital discipline. You can see that we’ve clearly
managed it in terms of both growth and results to core tier 1
ratio which
is well in line with our yearend targets of 6% and 8%. We’ve
also been able to manage our risk-weighted assets to the extent
of staying
just below 300 billion, that’s 294 billion.
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This… All
of this leads us to a situation where we are well on track to
deliver an
EPS of 2.3 in the full year. Certainly with an adjusted EPS of
1.26 in
half one, we should be in a good position to achieve that. Of
course there
is some uncertainty in the second half of this year and we feel
however
that even in that uncertainty we’ll be able to deliver on our EPS target
of 2.3.
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This
is where
I hand over to you.
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Rijkman
Groenink:
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I’ll
just
(inaudible). Thank very much Huibert. I’ll just
follow-up with the, to cover the second part, the second press
release
which came this morning on the merger situation and start with
the short
review of where we come from. Of course all our strategic
analysis and exercises have been based on the vision which we
have
developed over the years for ABN AMRO. The ambition to be a
leading European based bank, sustainable market positions in
growth
markets, particularly in Brazil, Asia, and Italy, and focusing
ourselves
as a client led organization on the needs of our, particularly
our mid
market consumer and commercial clients. On the basis of
managing for value, creating value for our shareholders with
ambition
targets in terms of beating our peers in terms of efficiency
growth and
capital management.
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Now
over the
years the ways how to reach those goals have evolved. Now of
course organic growth has always been a part of our
package. Also, acquisitions have been part of the
game. We have for years explored the possibilities on merger of
equals. We kept in reserve a merger of, a merger in which we
will be a junior partner and at the bottom of the list, of course,
being
acquired. Now over the, in the course of 2006 we have come to
the conclusion that we should expand our review to also include
a merger
as a junior partner in a merger and to that end we intensified
our talks
with a number of potential parties in Europe. Next to reviewing
the options of a merger we continue to review alternatives like
stand-alone case or breakup of the bank. We assess those
alternatives first as a merger, we came to the conclusion that
a merger in
which we will be a junior partner will meet most of our visionary
requirements and that it will be better than a stand-alone scenario
as we
are presently working on. We announced a merger with Barclays
on the
23rd
of
April.
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The
rational
for that merger you will find on page, next page. Listen, sorry,
I’m a
little bit slow in turning the pages. What are the
opportunities from the merger with Barclays? It’s actually a
significant opportunity accelerate our strategy for growth in
the growth
markets. It creates better opportunities to serve our customer,
broader
markets product capabilities from cards, asset management, and
capital
markets, and also the financial metrics of the deal, the equity
stories
are very good, very strong cost synergies, and very high opportunities
for
revenue synergies going forward. Of course it’s highly, it’s
(inaudible) to the fact that we can also show high cost synergies,
it’s
highly, the combination is compatible with each other and
complimentary.
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The
Board’s
decision was very clear on the 23rd
of
April. We combined it with the sale of LaSalle, which was an
opportunity arising in the last four days of negotiations. Why
did we take this opportunity? Just to repeat it again, we took
this opportunity because it sets the value of LaSalle and it
sets, it set
that part of the deal and it helped us to extract a higher offer
from
Barclays with something like two euros. Interestingly enough,
of course, also subsequently when the Consortium came in with
their bid,
they had to base themselves on the bid already (inaudible) Barclays
so the
sale of LaSalle also originally helped immediately to put in
a higher
number from the Consortium. As I said, we reviewed stand-alone
options both on a stand-alone basis and a managed break up analysis
on the
22nd
of
April together with the merger proposal from Barclays and again
we came to
the conclusion that those options were not attractive enough,
not creating
enough value and at the same time of course the most important
thing, the
execution of this would totally lie with shareholders of ABN
AMRO. So the Board, the merger with Barclays was
recommended. The logical consequence of the negotiations we had
with the Barclays and the choice, the active positive choice
we made
ourselves.
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Now
the
meantime of course a lot has happened. Until we reached the
23rd
of
July last week, well we reached a situation in which we had a
firm offer
of the Consortium on the table and we had a revised proposal
from Barclays
and this allowed us for the first time to really compare the
two offers
because they are, they’re actually bidding for the same ABN AMRO, the same
assets, and it created the opportunity to evaluate them next
to each other
and there with also setting a next step in creating a level playing
field
for those bidders and for our shareholders.
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On
the...
Interesting complication, of course, is the Dutch law situation
which
requires from the managing Board and supervisory Board to express
a recent
opinion on the merits of a proposal to all stakeholders, the
bank and all
stakeholders including shareholders. So the Dutch law requires
from the Board not only to review an offer with a purpose of
a being
capable of recommending it to shareholders but it has a grounding
and
ramification. So we did review the Barclays’ offer in that
context and we concluded that the
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| offer of the merger plan of Barclays deserves our support, our continuing support. It fits perfectly with our strategic vision. | ||
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It
has all the
elements of a deal which we prefer, except for the fact that
of course the
price offered by Barclays at this point in time due to valuation
of the
Barclays share in the market is not superior to the offer made
by the
Consortium and therefore it cannot be recommended to our
shareholders. So on the request of Barclays to make the
recommendation, we had to respond negatively, which we have
done. Amendments to the merger protocol have been affected. The
deal is, it continues to be governed by the merger protocol with
a number
of amendments which we have filed today. We reviewed on the
same basis and with the same intensity the Consortium offer.
The
industrial plan of the Consortium offer, of course, which is
based on the
breakup of ABN AMRO doesn’t have the same value and merit to ABN AMRO and
stakeholders as the Barclays’ offer. In that sense it has not
the same reach. But, of course, we have to make it clear that
obviously
the price offered for ABN AMRO to ABN AMRO shareholders by the
Consortium
is superior to the offer from Barclays. But, at the same time,
that doesn’t allow us to recommend that offer today because there are a
number of unknowns, uncertainties, and potential obstacles which
make it
at this point in time impossible for us to recommend. To
mention a few of the uncertainty around the shareholders meeting
outcome,
the shareholders meeting of particularly (inaudible) whether
will approve
the increase in their share capital, secondly the funding situation
for
particularly again (inaudible) and their present market circumstances.
Thirdly, the Dutch Central Bank recommendation to the ministry,
we have no
idea about the position of the Central Bank East whether they
will agree,
not agree, or agree with conditions and whether those conditions
will be
manageable by the Consortium (inaudible) so creates a substantial
uncertainty and the last part which of course directly relates
to the
first three. There is a very general (inaudible) in the documentation
which we think believe is not acceptable to our shareholders,
so a number
of things have to become clear, all have to be changed before
we will be
in a position to recommend the offer from the
Consortium.
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So
the
conclusion was after two days of deliberations that we could
not recommend
either offer to shareholders. We will engage with both parties
to further explore the offers, both the financial side of it
whether any
improvements are possible. But also particularly with the
Consortium, we want to engage actively to establish whether our
concerns
around the execution of the transaction can be mitigated or taken
away and
we guessed that also the Consortium has some further questions
to ask from
us. So we will work the coming weeks and months to see
that… And as far as it relates to ABN AMRO, both offers have a
fair chance of being made available to shareholders for their
choice.
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So
that’s the
position as of today .We all know that things may change. Also
the position of the Board of ABN AMRO may change
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| depending on the circumstances. We will be reviewing the situation regularly in the coming weeks and take all subsequent developments into account and it looks like the most likely situation that some were before the EGM to be held somewhere in September that we will have a definite review position again and that we will come out with a, with a new position at that point in time. | ||
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This
is as far
as our presentation go. I’ll end up with putting our conclusions on the
screen so that you can just absorb the conclusions of our presentations
on
the numbers and on the strategic developments. So I think we
should leave it at this and give you an opportunity to ask
questions.
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Yeah,
go
ahead.
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Male
Speaker:
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I
would like to ask a number of questions, if I may. First, when
you received a letter early this year, TCI, and one of the reasons
why
they wrote you a letter and I wanted to propose some changes
was that they
thought that the share buys was rather disappointing in the past
few
years. I remember in particular a period when the share price
dropped well
below 20 euros, which was rather disappointing when you continue
to
proceed with the acquisition of (inaudible), although perhaps
some
shareholder disapproved of that. Now with a 150 million net
profit in the first half of the year, let’s say on an annual basis 300
million for a bank for which you paid 7 billion euros, don’t you think
that shareholders at the time were right and that you shouldn’t have
proceeded with the acquisition?
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Rijkman
Groenink:
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Well
I don’t
think with all respect to shareholders so that those shareholders
certainly did not, could not foresee that this result in the
first half of
2007 will be the result. There was a general sense, I don’t think there
was any question whether the acquisition by ABN AMRO was strategic
or not.
I think there was general consensus it was. But there was a,
there was some feeling in some quarter for shareholders that
we were
paying a rich price, too rich a price maybe. We have based
ourselves at the time very much on the business plan by the company
and we
have done our, done of course our own independent review of the
capabilities. What we have to agree is that the, that
Antonventa has, is taking more time than we anticipated. Well,
first of all, of course, when we made our decision to bid for
Antonventa,
between that time and actually when we got control over the bank
was a
year later, so only in April 2006 we were in control of Antonventa
and we
could get into the company. Now we would have thought that by
the end of
the year we would not only be totally in control but also that
we would
have everything on track in terms of improving the performance
organizational structure, key people in management teams, new
products
launched, refurbishing of the branches, you name it, a very,
very
aggressive and ambition program. It took us more
time. The organization did not respond as quickly as we
wanted. So what we see up till now and therefore we still
believe is that, yes, indeed we are behind but we are behind
and not off
the track, but it’s going
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| slower. Certainly also a part from a number of one-offs left and right, negative and positive in the first half it is true that the bank has not grown as fast as the Italian markets as such which in a number of areas is of course hurting the performance of the bank and Huibert can elaborate in detail if you want some more detailed numbers. But we are convinced that we’re still on the track and that we are executing our programs albeit slower; although, we don’t think that we cannot be certain that we can make the 500 billion which we indicated. We will be… We are confident that we can beat last years results, so somewhere between 413 and the 500 million will be realized by Antonventa. There is a steep increase in operating performance but it’s based on what we see today and the acceleration of activities and the organization getting really ready to market its products and services to its customer base. Of course, this works its way through also to the projections for the next year and the year after and we believe that we can, we still have the capability of making the projections which we had ourselves also for 2008. So on the basis of that, if we do continue to make those projections, then we can maintain that this acquisition was not only strategically very well positioned, but also that from a financial perspective we will be meeting the hurdle rates which we have set in terms of return on original investment within the timeframes still which we set for it. | ||
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Huibert
Boumeester:
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The
only
comment I would add that too I think a very holistic description
of
Antonventa is of course that your assumption of the 300 million
net profit
would be the end result is therefore not subscribed to by us
as we are
forecasting perhaps some difficulty of achieving the 500 million,
but
certainly as expect, as Rijkman has already said, to exceed the
previous
year’s net profit of 413. On that basis I think you need to
look at the performance of Antonventa and as in the following
years we
will closely need to track the performance to make sure that
everything is
going on course. We feel that we’ve done quite a lot in the last months to
provide a firm platform for growth in Antonventa.
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Male
Speaker:
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I
still have a
few other questions.
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Rijkman
Groenink:
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Sure.
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Male
Speaker:
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Two
euro 30 was your target for this year. With an EPS of 1.26 for
the first half it seems indeed as if you are quite well on track,
at least
with this target. However, usually first half is traditionally
much better than the second half for ABN AMRO. Given the fact
that long-term interest rates have been coming down more recently,
it
looks as if your ALM results, which have been declining already
in the
first half, will decline further in the second half. Given market
(inaudible), I can imagine that the good result of global market
can at
least be maintained in the second half, even if you are making
2 euro 30
for the full year, do you think it’s likely that the second half will not
be as strong as the first half?
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Rijkman
Groenink:
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I’ll
give the
general answer, then Huibert can fill in with what he wants to
add. If you
produce 1.26 on an adjusted basis in order to make it comparable
to the
2.30, which also suggested number, then if you would just simply
double
that number, you get to… I can’t count but it’s something like 2.52, yeah.
Now 2.52 is more than 2.30 and if we say that we maintain 2.30,
at least
230, that it indicates, I think you alluded to that, that indicates
that
we are cautious with the second half so… The reasons for being
cautious are the ones you mentioned yourself, market turbulence
is
something which probably could affect the global markets performance;
spreads coming down, I’m not so sure whether that’s a serious influence on
our business, the first half normally being better. Well that’s
true, but last year it wasn’t, for example, that it was not
true. But we also have our own reasons. We have done a bottom
up forecast for the full year taking into account the assessments
of the
businesses BU by BU and the cautioning we have is ABN AMRO specific
and
that of course is that we cannot exclude that the prolonged period
of
uncertainty will cause some slowdown of business generation it
is
possible. We haven’t seen any effects of that in the first half
year, but of course it cannot be excluded, so that makes us apart
from
market conditions slightly cautious on the second half, but not
that
cautious that we cannot and dare not to maintain our forecast
for
EPS.
|
|
|
Huibert
Bourmeester:
|
Yeah,
I think
the EPS number is also of course derived off the kind of products
that we
sell in the markets, you rightly point to global markets, which
are very
active in both equities, fixed income, and all sorts of credit
products. We also have of course expectations for our other
BUs. The combination of the corporate uncertainty and the forecasting
that
we’ve done leaves us to be cautious, but still quite firm on the
statement
that we’re well on track to deliver the 2.30 EPS which should give comfort
to our shareholders, but also to market at large and particularly
the two
bidding parties that are looking at our results. As Lagman
Cortwrighty* says, “We have not seen any material impact yet from the
corporate uncertainty that only the uncertain conditions that
we have for
ABN AMRO.” We are cautious. We’re not saying that
there will be material impacts. We are just cautious and
therefore with some caution we look at our numbers and that leaves
us on
the base of our forecast and all our assessments to say, “We’ll certainly
make the 230, but beyond that we want to be a little bit more
cautious.”
|
|
|
Rijkman
Groenink:
|
If
you look at
the components of course the third and the fourth quarter, the
third
quarter, of course, is traditionally slow and ABN AMRO has been
every year
and there’s no reason to expect that to be different this year; although,
I understand that people are still happy over the pipelines in
July and
that of course would have to be made up by a fourth quarter in
order to be
in line more or less with the second quarter and there of course
the
caution sets in because we cannot look beyond the next few months
to see
whether the pipelines businesses are effected indeed by the (inaudible)
corporate uncertainty. So it’s particularly looking out to the
fourth quarter that we cannot exactly say what the affects will
be.
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
10
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
|
Male
Speaker:
|
I’ll
ask the last question on the corporate uncertainty. You can
reduce that perhaps by coming as soon as possible with a clear
vote on
either one of the two parties. Have you made a date, set a date
yet for the shareholders meeting and is it possible that of the
shareholders meeting of (inaudible) and Royal Bank of Scotland
next week
if they decide positively on the acquisition that you may come
up with a
vote before the EGM?
|
|
|
Rijkman
Groenink:
|
There
is no
vote in the EGM. In the Netherlands recommendation, because
vote, shareholders vote by selling their shares to one of the
bidders and
that we cannot influence apart from talking to our friends, but
the
Consortium has already said it’s offering period until the 6th
of October.
We understand that Barclays will do more or less similar period,
so that
means that the shareholders will have the opportunity to actually
select
which bid to take for the next two months and there’s not of our doing;
that’s their doing. There’s nothing we can do about it because
we cannot… The interesting thing is that a recommendation of ABN AMRO for
one of the two bids is not likely to change the behavior of our
shareholders at all. Our shareholders will be, most of them
will be (inaudible) for: What’s the highest price available from any of
the two? They don’t care whether Consortium wins or Barclays. They want
the highest price. Substantial part of our shareholders will
take that position and there is a smaller group, probably a smaller
group
because we don’t know any percentages because we don’t have a register, so
it’s only a market information that we can base our self, but a
smaller
percentage… There’s also a group of institutions who have to take the
highest bid according to the bylaws and then there is a group
who has the
freedom to make a choice and that group, which is probably smaller,
they
will not just look for the highest cash offer, they will also
look to the
investment opportunity of reinvesting the money and that of course
is that
option is only available on the Barclay side. So in order for
the shareholders wanting the highest price, they will probably
just wait
as long as they can before they actually sell their shares to
any of the
two and the recommendation is not going to make any
difference. The EGM we have to hold, according to the law,
eight days before the runoff the first bid announced. That’s the
Consortium bid, the 6th
October, so
we have to work our way back a minimum of eight days before the
EGM. We’re
thinking of somewhere now in the third week of September, all
things
equal, and in that third week of September then a number of things
will be
clear. First of all, the shareholders approval of Barclays, World
Bank of
Scotland, and Fortis will be there or not. Subsequently if the
approvals are there for Fortis and World Bank of Scotland, they
can think
about their funding whether they will start their funding operations
and
publish their underwritings because up till today there is only
a very
general volume underwriting with (inaudible). There’s no
specific underwriting per transaction and a price, that still
has to be
done. That of course is a uncertainty which today is in the
market and might last for many, many more weeks and that the
(inaudible)
and the depreciation financial sector which could cause difficulties
in
funding those transactions. But we take
it
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
11
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
| that (inaudible) that third week of September there will be clarity about that point as well and the last point of course which is important in terms of clarity is the Central Bank’s position on the Consortium’s proposal. The Central Bank is due to the time limits which are in place for the periods, they have to come up with an advice is supposed to come out with an advise to the minister somewhere around mid August. So the Barclays could potentially have the word from the minister somewhere in mid August and then we guessed at some months later for the Consortium because they also applied a month later to the D&B for their approvals. So that’s three things. In the meantime we also have had extensive talks with the Consortium on the execution of their plan, how they should be managed, who should be managing what, etcetera. We should have negotiated the (inaudible) which presently is too general in the offering document of the Consortium. At any point in time without any reason, the Consortium can run away. I don’t think that’s an acceptable position to our shareholders. So around that time we should have clarity of all these points and at the same time there should be, there has been share price movement and development particularly on Barclays’ side and that could be an opportune time for the bank to review, again, the offers of both parties and come back again with a recent opinion as we have done this weekend for that period and then of course there’s another two/three weeks to run in which basically the final decisions by shareholders will have to be made. | ||
|
Male
Speaker:
|
(Inaudible)…
Securities. I have five questions, more operational
related because you were very clear about the current
issues. First is: Loan loss provisions are nearly at
an all-time high at ABN AMRO, while we see it (inaudible) nearly
all-time
lows, we see substantial increase in Italy, also in the Netherlands.
Why
are the loan loss provisions at ABN AMRO much higher than at
the
peers?
|
|
|
Rijkman
Groenink:
|
As
for
clarification, percentage-wise or in absolute numbers, what you
talk
about?
|
|
|
Male
Speaker:
|
More
in
percentage.
|
|
|
Huibert
Bourmeester:
|
Would
you like
them one-by-one or shall we… Yeah, okay. Maybe we
can turn back to the slide that dealt with provisions. Let’s
see if I can find it quickly for you. But let me first
(inaudible) of one notion and that is that we have higher provisions
than
our peers, particularly if you look at the provisions that some
of the
other banks such as Citibank and HBC you will see provision levels
that
are very similar to ours. Why do I say that? Because the way we
look at our provisions and we try to talk through our provisions
is very
much related to whether they’re either from a consumer perspective or from
a commercial perspective. Doing multitasking is not easy for
men, as I have read somewhere and I’m providing the point. I
think you correctly highlighted but three units, but we also
see on this
picture first, the first comment I’d like to start off with, 82% of our
provisions are from consumer and 18% are commercial. We are
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
12
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
| actually seeing an all-time low comparable to most of our peers in those particular segments relative to commercial. You can see for instance that Europe that has hardly any consumer business has hardly any provisions. Similarly you see that we have relatively low levels of provisions in areas that have big commercial exposure. Let’s take you through the four units that you indeed reflected on. The first one is Antonventa. Antonventa we changed the accounting in Antonventa, we alluded to that already when we reported on the (inaudible) Q3 and in the full year, which has to do with a different way of accounting for provisions. If you take out the effect, and I refer you to the press release pages that deal with Antonventa, you will see that the difference between last year and this year is 16 million, 1-6 million. We also have made a statement in our press release relative to Antonventa that we expect provisions to go down as a consequence of our improved credit approval systems. That should give you some comfort for Antonventa. Provisions in the BU Latin America are really of course a consequence of significant growth, that I also shared with you of the overall retail loans portfolio. We have shown indeed, as Rijkman is saying, 31% growth over last two years in those portfolios and with that come provisions. So what we then always look it is our net credit margin which is very substantial in Brazil. The third one is our provisions expressed as base points in the balance are still acceptable; although, we did have to take two substantial additions in the corporate clients’ area. Finally the provisions in BU Asia, as you can see, move up, but they move up in line with the growth and actually they are better than growth, i.e., lower than growth levels in Asia. So the total growth from 720 million in the first half of ’06 and 886 in the second, in the first half of ‘07 leads to a change of 166 net. If you compare that change to the overall growth of the portfolios, particularly because, as I said earlier, 80% plus of this is consumer, we would actually say that on a peer level, i.e., comparing it to those players in those markets, what is Taiwan, Latin America, etcetera, we have ample public data that shows that we have actually a slightly better performance in terms of our provisioning. We do expect provisioning to increase marginally in the commercial portfolio. I already indicated that we are at lows in the market. A feature of ABN AMRO Brazil is now our third largest net profit contributor. We’ll be that with that size of a consumer portfolio in Brazil is that you will see a different profile, as we’ve explained over the last two years, than in the past and that drives these numbers on provision and we feel comfortable from an ABN AMRO point of view that these provisions are both appropriate and enough to cover our sins, if you will, but equally also leave us with high credit margins over the products that we sell. That’s the first point. | ||
|
Male
Speaker:
|
Second
question is about what’s the amount of net inflow in private clients
because it was mentioned in the press release where asset management
did
not (inaudible) private clients.
|
|
|
Huibert
Boumeester:
|
On
the assets
under administration in private clients, we don’t usually give the actual
relation of new assets under administration. What you can see
in the unit,
as we say, is that we’ve had two bits
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
13
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
| of… In fact, one is we’ve sold our business in Miami and that of course had a significant, or significant, a meaningful number of assets under administration on its books. We haven’t disclosed the actual number, but what you can see is that the mix of product in terms of higher volumes in non-interest related products like stocks, investment funds, and structured products has led to an overall increase by 4.7%. If you look at the total or at the profits for the period, excluding the gain on the sale from Miami, you end up with a very robust 27.3% increase to 154 million in terms of net profit. That is important and that’s therefore more a result of inflows in volume or less a result of inflow in volume, more a result of different products sold which clearly have a higher margin. | ||
|
Male
Speaker:
|
Well
perhaps still more… The answer on my question, was the net
inflow in private clients positive or negative because in asset
management
it was negative?
|
|
|
Huibert
Boumeester:
|
What
you can
see here, and I’m going to draw your attention to Page No. 25 of the press
release, we’ve tried to be as specific as possible on the assets under
administration, which of course we have given the gross numbers,
so up
from 133 billion to 150 billion mainly reflecting higher net
asset values,
but we’re not giving specific numbers. We’re also giving the
net new inflow as a consequence of (inaudible) and the deduction
of 2.4
billion of the sale of PC. But farther than that we don’t go
and we are just pointing out at this moment in time that the
increase in
profitability in private client should give you quite a lot of
confidence
on the, both the business model and the ability to give us the
right
return on assigned risk capital.
|
|
|
Male
Speaker:
|
Then
a
third question and it’s about business unit, the Netherlands, a little bit
results are distorted by the inclusion of the global
activities. Is it possible to give the results of Dutch
activities without the global activities?
|
|
|
Huibert
Bourmeester:
|
We
have
undertaken to report externally the BU NL as any regional BU,
inclusive of
global clients since the 1st
of January
’07. What we are keen to do is make sure that the commitments
were tracked in terms of the return on assigned risk capital
commitment we
made for global clients, so we do publish on a semi-annual basis
the
results for global clients, but it won’t be the other way around, so you
won’t be able to get access to those numbers.
|
|
|
Rijkman
Groenink:
|
But
of course
slightly more volatility introduced in the BU NL numbers due
to the
inclusion of global clients.
|
|
|
Huibert
Boumeester:
|
Yes,
and you
can see that actually in the second quarter, to Rijkman’s point, where you
see that because there was a significant number of bigger deals
in the
first quarter but not in the second you see some volatility as
a
consequence.
|
|
|
Male
Speaker:
|
Well
that’s a consequence more difficultly to analyze the
results. Then a third question perhaps combined with the last
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
14
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
| question. The third question is about BU asset management. What was the reason for the outflow of (inaudible). I assume big clients leaving or was it an overall outflow of activities? The last question is: Were large advisory costs in the second quarter, what do you expect in advisory cost for the second half of this year? | ||
|
Huibert
Boumeester:
|
To
answer your
question on outflows for asset management, they related particularly
to
one activity in one subset of our fund offering. In particular
and across the Board, we saw, as you can see, a positive market
depreciation and some minor net negative outflows. We did see
strong inflows at (inaudible) and we did see a very stable asset
mix. I
think that gives you a little bit of a feel for the asset management
business. In terms of your question on the advisory fees, do
I understand
correctly you’re referring to the advisories that we have included in a
note for the, under the first segment, mainly the advisory fees
for the
transaction? Yeah, and what is your question around
that?
|
|
|
Male
Speaker:
|
What
can we expect in the second half of this year?
|
|
|
Huibert
Bourmeester:
|
We
have, we
have… You can I think assume that that number will not quite double,
but
it will be close to that number in the second half, so the totality
is
doubling that number with a small margin in the right
direction.
|
|
|
Male
Speaker:
|
(Inaudible)…
|
|
|
(Cross
talk)
|
||
|
Rijkman
Groenink:
|
Thanks
very
much (inaudible). Anyone else?
|
|
|
Male
Speaker:
|
Two
questions, one question just a follow-up on the BU Netherlands,
especially
on the low volumes of consumer loans. Could you clarify how the
trend is going especially because the economy is going quite
well? My
other question is on you mentioned in the valuation process that
you’re
now in neutral. Does that also mean that you find it realistic
option to
untangle the bank and its activities in the Netherlands and in
other
countries?
|
|
|
Rijkman
Groenink:
|
Yes,
I’ll just
go to the second one and you can answer the (inaudible) the other
one. The position is for the banks is we cannot recommend
either of the two offers, but we do continue to support the Barclays’
offer due to its strategic content and the opportunity to keep
ABN AMRO
more or less intact, retain all growth opportunities create bigger
opportunities for our customers. The breakup scenario as such
is proposed by the Consortium is not a favorite as such of the,
compared
to the offer, the plan, the industrial plan from Barclays. It’s
not to say that we cannot ultimately recommend the offer of the
Consortium
to our shareholders, but if you just compare industrial plan
from Barclays
versus industrial plan of the Consortium, to us on balance that
looks the
more favorable outcome
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
15
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
| for the bank and its stakeholders. That’s the conclusion which we have drawn over this last weekend and published today. Consequently and implicitly of course it says something about how we view breaking up the bank. We don’t think it’s… We cannot convince ourselves that it’s in the interest of other stakeholders than shareholders. But that doesn’t mean that under very detailed circumstances it might be something which ABN AMRO would conclude to do. The thing is what has come out of our analysis of reviewing a managed, we call a managed breakup by ourselves is that the value range which we can create with that exercise is around the offer from the Consortium. The range goes slightly lower to slightly higher. Now that’s, that is, that’s not the difference of 25%, 30%, 50%, 100%. It’s a marginal difference and that has to do with the fact that the offer of the Consortium is fairly pricing the overall ABN AMRO, maybe not all in parts, you could say, it’s valuing the business properly. But overall the valuation of ABN AMRO seems to be all right if we do our own analysis of valuing all bits and pieces against super premia [sic]available in the market. So in itself we cannot create a superior value of what the Consortium offers, so then you have to compare it for our shareholders. Is it in the interest of our shareholders to tell us, “You do the breakup yourself.” Of course we can mitigate the risks because we can manage it much better than the Consortium. We know this bank; we know how to do it, but the end result will take quite some years to do it effectively. There is a substantial tax liability, which we have not been able to find out how we can circumvent because you talk about returning to shareholders basically all the capital, 70 billion plus to shareholders, which we cannot do today in a tax efficient way. So the range which we have, the valuation range which we have doesn’t take into account the time, value of money, nor the potential tax effect, the tax leakage if we would have to do it. We don’t have the capability for buybacks of in that scale repaying reserves, what kind, what have you, all kinds of measures you could think of so that could be a complication. This means that basically the execution with which I’m describing in this scenario rests totally with our existing shareholders. If are shareholders allow that to do, they’ll take the risk of this execution, plus of course if they offer their shares to the Consortium and they get cash, they’re out and they don’t have the execution risks. So we cannot see how we can turn this into a viable opportunity for our shareholders, not for a year of difference. You would need substantial surplus value in order to make, to compensate for the execution risks. You’re thinking. Can you understand what I’m saying? | ||
|
Male
Speaker:
|
I
exactly understand but that means also that from a Board perspective
your
view is still that for the customers and your employees, Barclays
is a
preferred option?
|
|
|
Rijkman
Groenink:
|
Yes,
correct,
yes.
|
|
|
Huibert
Bourmeester:
|
Maybe
I can
now give you an answer to the first part of your question which
is of
course commented as you as can see on Page 12 of the press
release. We… I think that’s where you picked up the
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
16
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
| comment in terms of consumer loans growth. It says, the commercial loans saw volume growth in lower margin and the inverse took place in consumer loans, i.e., we have not taken price as a way to compete with our consumer loans business. We have seen very healthy growth in our mortgage business, but even there we’ve not always competed on price because that business remains under pressure. So we take a very deliberate approach to our pricing methodology to the Dutch market. We certainly don’t see ourselves as competing on price only and that leads to volatility in market shares that we fully accept in terms of delivering value both into customers and ourselves. | ||
|
Rijkman
Groenink:
|
Is
there a
question from the telephone?
|
|
|
Operator:
|
Thank
you.
If you have a question, please press star and one on your touchtone
phone.
Please be patient while we’re queuing for
questions.
|
|
|
John
Maysoes from Alpine Associates is now online with a
question. Excuse me; John, please go ahead with your
question. Excuse me; Stuart Graham from Merrill Lynch is now on
line with a question.
|
||
|
Stuart
Graham:
|
Oh
hi. Can you hear me?
|
|
|
Rijkman
Groenink:
|
Yeah,
Stuart,
yes.
|
|
|
Stuart
Graham:
|
Hi
there.
I had two questions on risk please for Mr.
Boumeester. Firstly on leveraged loans, could you maybe comment
upon the conditions in the leveraged loan market at the moment?
Are you
still active in that business and maybe you could tell us what
your volume
of underwriting commitments is at the present time on leveraged
loans? The second question is: U.S. subprime in your markets
business, maybe you could tell us what your exposure to U.S.
subprime
related ABS is and also CDOs based upon U.S. subprime ABS
please?
|
|
|
Huibert
Boumeester:
|
Thank
you
Stuart. If you allow me I’ll start with the subprime question.
We have no material exposure to the subprime markets in any of
our
businesses. Secondly, of course, we do closely monitor the
counter parties that may carry subprime risk in their books and
we will
continue to do so as the market evolves. On the leverage loan,
you wrote, or Merrill Lynch wrote I think a report on the development
or
the views of (inaudible) in the backhand of last year relative
to the
expectations of risk in the leveraged loan market. I think I
was also one of the people polled at that time and it was clear
from our
outlook that we were very cautious about leverage loan portfolio,
consequently ABN AMRO has managed its, both its underwriting
limits and
its final take limits conservatively and we are not concerned
with our
exposure to leverage loans. We are still concerned with some
of the
development in the marketplace and we will also continue to monitor
that.
|
|
|
Rijkman
Groenink:
|
That
answer
your question, Stuart?
|
|
July
30, 2007, 3:00 pm Greenwich Mean Time
|
Page
17
|
|
ABN
AMRO Bank N.V.
|
Second
Quarter Results
2007
|
|
Stuart
Graham:
|
Thank
you.
|
|
|
Rijkman
Groenink:
|
Any
further
questions from the telephone?
|
|
|
Operator:
|
Meiger
Jaap from Dresner is now online with a question.
|
|
|
Jaap
Meiger:
|
Hi.
This is
Jaap Meiger from Dresner. I had a couple of questions. The sale of
LaSalle certainly caused some confusion by the capital allocation
between
the business units and between your business units and the
holding. Now looking at your net interest income from the
holding, it sharply fell in the quarter mainly due to lower ALM
gains, I
presume. But is it true that you over capitalized your BUs at
the expense
of the holding; and if so, how do you charge for those inter-group
financing, is my first question? Second question relates to the
AFS gains on debt securities. You seem to have picked up quite
a lot and I
was just wondering how you would allocate them to the different
business
units? Finally, maybe I don’t expect an answer on that one, but
which parts to business units do you think are not fairly priced
by the
Consortium? Thanks.
|
|
|
Rijkman
Groenink:
|
Are
not,
sorry, are not?
|
|
|
Jaap
Meiger:
|
Which
business units of the Consortium are not fairly priced according
to your
view and which are actually fairly priced?
|
|
|
Huibert
Boumeester:
|
Maybe
we could
start with the capital question first. We’ve tried to explain
to you and it’s available of course still in terms of the accounting
reconciliation on the capitalization of ourselves and also relative
to the
capital ratio that we need within LaSalle and for the bank as
a
hole. We do mange capital tightly at 6.1%, our core tier 1
ratio has come out for the first half. We do not have a policy
of
deliberately under leveraging any of our units and we certainly
won’t
start doing that either.
|
|
|
Jaap
Meiger:
|
So
how
do you explain the negative 207 million net interest income then
in the
holding?
|
|
|
Hubert
Boumeester:
|
Yes,
I was
going to come to that.
|
|
|
Jaap
Meiger:
|
All
right.
|
|
|
Hubert
Boumeester:
|
So
the net
interest income I think you’re rightly alluding to, we have less ALM
revenues then we had seen over previous years. That will continue
to be
the case in this kind of an environment and perhaps I can just
jump to
your other question which is around in terms of our assets held
for sale,
our securities portfolio. Yes, that represents the total
benefits from our asset sale for sale and the P&L consequences of that
we do not split them out by BU.
|
|
|
Jaap
Meiger:
|
But
just fairing that you’re maybe inflating the BU Europe by some debt, debt
sales you’ve done they seem to be quite high,
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| certainly not sustainable. | ||
|
Hubert
Boumeester:
|
Sorry,
could
you repeat that question?
|
|
|
Jaap
Meiger:
|
They
certainly do not look sustainable those gains and debt securities
at the
level we’ve seen in the quarter are closer 200
million.
|
|
|
Hubert
Boumeester:
|
We’ve
seen
good returns from the securities that we had in our portfolio
and I would
certainly not recommend that you assume that they will be the
same going
forward per se.
|
|
|
Rijkman
Groenink:
|
On
the fairly
priced question, we think that not to name any specific assets,
but we
think that there might be a certain under evaluation of emerging
market
assets in a certain over evaluation of mature assets, assets
in mature
markets.
|
|
|
Jaap
Meiger:
|
Interesting. On
the cap allocation it should be done, I assume that roughly you
allocated
about 6% to every BU, I presume that there are not major
deviations.
|
|
|
Hubert
Boumeester:
|
Deviations
are
sometimes caused by local regulations which may require, of course,
a
higher capital ratio, which is currently of course the case in
most
emerging markets; therefore, you might because of regulatory
reason see
some over allocation of capital. But it is never our intention
to deliver the capital, on the capitalized any unit.
|
|
|
Jaap
Meiger:
|
You
do
charge for inter-grouped financing, I suppose?
|
|
|
Hubert
Boumeester:
|
To
confirm
that point, yes.
|
|
|
Jaap
Meiger:
|
All
right. Thanks (inaudible).
|
|
|
(Cross
talk)
|
||
|
Rijkman
Groenink:
|
We
follow the
methodology of assigned risk capital, which is (inaudible) scientific
way
of allocating capital on the basis of a risk assessment and the price for
that is the same.
|
|
|
Jaap
Meiger:
|
Yeah,
you’ve
disclosed a previously unit assigned. Thanks a lot.
|
|
|
Rijkman
Groenink:
|
Any
further
questions from the telephone?
|
|
|
Operator:
|
Arturo
De
Frias from Dresner is now online with a question.
|
|
|
Arturo
De
Frias:
|
Yes,
hello. I have a couple of further questions I’m afraid
again related on the offer, on the mechanics of the, to the fine
offers or
your view of the (inaudible) offers going forward. First
question: You have alluded to several reasons why you still
cannot recommend the Consortium offer and I think the two first
issues
related to 40s, the (inaudible)… and the second (inaudible) relating to
the funding which (inaudible) to some extent the same point. My
question would be: If the ABN of 40s
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| goes higher on the (inaudible) for the capital increase, could that impact your view of the Consortium, could that help us or help you to recommend the Consortium offer? Second question, and related to the first one, you have said that despite you have redrawn the recommendation for the Barclays’ offer, you still support the Barclays’ offer to some extent because they still want to kind of acquire most of ABN, but there are people in the market who thinks that still the ABN, sorry, the Barclays’ offer is significantly inferior to the Consortium offer and the only way that Barclays can change that is by selling more assets, so pledging to sell more assets of ABN. If they were to do so, if they were to announce, for example, that they have plans to sell Brazil to a third party to increase their cash in their offer, could that impact negatively in your view and your still kind of support of the Barclays’ offer? Thank you. | ||
|
Rijkman
Groenink:
|
Your
first I
tried already to answer and I said, of course, the uncertainties
and
unknowns relating to the Consortium offer make it for us impossible
today
to recommend the offer. But I also said that we can clearly see
a
situation in which we would recommend the offer if the offer
financially
is, continues to be clearly superior to the Barclays’ offer and the
uncertainties we mentioned are gone away, have gone away like
the
(inaudible) shareholders’ meeting, the funding, the Dutch Central Bank,
the (inaudible), a number of things. So we are not excluding at
all that at some point in time we would recommend for this
offer. The… You’re absolutely right; why didn’t we recommend
the Barclays’ offer, because the Barclays’ offer, although as an
industrial plan is favorite, is more favorable than the Consortium
plan,
it is inferior to the shareholders and therefore we cannot recommend
that
offer. That could change. But your question all relates to selling
more
assets. Well it is our understanding with Barclays, and we haven’t agreed
and we have an agreed deal with them, as you know, that this
is what it
is. We decided to sell LaSalle and we met their agreement at
that point in time when we (inaudible) to them. The merger rationale,
the
merger strategy of this combination is based on structurally
investing in
growth markets. And we can’t, Brazil and (inaudible) within the
Italian growth market as key assets in that growth strategy,
so we could
not imagine that a merger, an agreed merger with ABN AMRO would
consist of
selling these key assets.
|
|
|
Arturo
De
Frias:
|
So
in
other words, if they were to need to sell Brazil, you would immediately
withdraw your recommend, well it would make it impossible for
you to
recommend their offer again.
|
|
|
Rijkman
Groenink:
|
Well
it would
not, that depends because it would… I think the basis for the
merger agreement could then be doubted and it could not any longer
be an
agreed merger between the two of us. It could therefore be an
unagreed deal, an unagreed offer like the Consortium today is
an unagreed
offer. As I earlier said to you, we could even recommend and
unagreed offer from the Consortium, so technically there could
still be a
possibility that we would
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| recommended… If that, if of course that bid would become superior to the Consortium because that is the only criteria which we use for recommendation, recommending an offer to shareholders that the bid has to be superior for shareholders. | ||
|
Arturo
De
Frias:
|
But
to
some extent, and correct me if I’m wrong, this is kind of eliminating the
possibility of your recommending the Barclays’ offer (inaudible) because
it seems clear that Barclays will not be able to present a superior
offer
to the Consortium without selling all their assets. So either
the offer is
not superior or they will sell all their assets and in both cases
you
wouldn’t recommend their offer.
|
|
|
Rijkman
Groenink:
|
Well
I remind
you, I’m not going to speculate whether the share price for Barclays
could
not gain to such an extent that the offer automatically (inaudible)
the
price for ABN AMRO would become superior to the offer of the
Consortium. That is not to be excluded
technically. There are few reasons which underlie the potential
for the Barclay share price to recover. First of all, the
stand-alone value of Barclays by the analyst world the consensus
is that
it should be around 8 sterling and not what it is
today. Secondly, the market has not incorporated any of the
cost synergies contemplated with the merger with ABN
AMRO. They’re not in the share price
either. Thirdly, the market has digested, but also not prudent
to the share price positive effect of the strategic corporation
with China
Development Bank. So there are enough grounds to underpin the
possibility that the Barclay share price would recover sufficiently
to
become the basis for a competing and superior offer to the
Consortium.
|
|
|
Arturo
De
Frias:
|
To
some extent, and sorry to reiterate, but to make it clear, to
some extent
the only hope that Barclays is still (inaudible) in order to
become again
recommended is that their share goes up
substantially?
|
|
|
Rijkman
Groenink:
|
I
would tend
to agree with that.
|
|
|
Arturo
De
Frias:
|
Okay. Thanks.
|
|
|
Rijkman
Groenink:
|
Any
further
questions from the telephone?
|
|
|
Operator:
|
Jean-Pierre
Lambert from KBW is now online with a question.
|
|
|
Jean-Pierre
Lambert:
|
Yes,
good
afternoon, Jean-Pierre from KBW. Three
questions: The first one is: What is the total net profit
contribution of global markets plus global trading? I mean
there’s overlap between the two just to see what is the contribution
of
corporate investment banking if you wanted a total
(inaudible). Already I think global trading is around 32%, so I
wonder asset global markets is 32% if you add global clients,
so then what
is the total of global markets plus global clients excluding
the
overlap? Second question
is…
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2007
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Rijkman
Groenink:
|
Just
for
understanding properly, you just said global markets plus global
trading
(inaudible)…
|
|
|
(Cross
talk)
|
||
|
Jean-Pierre
Lambert:
|
No,
no, sorry, global markets plus global clients, excuse
me.
|
|
|
Rijkman
Groenink:
|
Global
clients, you said global trading.
|
|
|
Jean-Pierre
Lambert:
|
Yeah,
that was a mistake of mine, global markets plus global clients.
There was
an overlap between the two and I just would like to see what
is in that
profit contribution of those two units to the (inaudible)
group.
|
|
|
Hubert
Boumeester:
|
We
as… As you know, we assumed a different way of reporting from
the 1st
of
January 2006. For ease of reference we did include a way of
looking at our 2005 numbers on that basis in our annual report
of
’06. We no longer provide that data. I can tell you what the
contribution in terms of profitability from global markets because
we’ve
put it on our press release which is around 30% of our total
business and
we have, of course, highlighted the point that profit for the
period is
730 million for global markets. We do not provide other
data.
|
|
|
Jean-Pierre
Lambert:
|
Second
question, I’m coming back to the disposal. You indicate that it’s not your
intention to proceed with significant disposals in the present
time. I mean (inaudible) you consider that the disposal of
private banking, for example, private clients would be not a
significant
one would you be approached by a candidate for that
activity?
|
|
|
Hubert
Boumeester:
|
The
answer I
think is no, we would consider that a major disposal and we’re not
undertaking any major disposals.
|
|
|
Jean-Pierre
Lambert:
|
Thank
you.
The last question is purely informational. What is the
size of the risk weighted assets of the LaSalle activity, maybe
it’s
disclosed?
|
|
|
Rijkman
Groenink:
|
What
is the
size of the…
|
|
|
Jean-Pierre
Lambert:
|
…risk-weighted
assets.
|
|
|
Rijkman
Groenink:
|
…risk
weighted
assets, okay.
|
|
|
Hubert
Boumeester:
|
It’s
64
billion euros.
|
|
|
Jean-Pierre
Lambert:
|
Thank
you very
much.
|
|
|
Hubert
Boumeester:
|
But
let me
clarify that further, if you want further data on RDWs, we’re happy to
give those to you and refer you to the right section through
Investor
Relations.
|
|
|
Rijkman
Groenink:
|
Any
further
questions from the floor or from the telephone because
|
|
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| we’re getting (inaudible)… | ||
|
(Cross
talk)
|
||
|
Operator:
|
Ralf
Bauer
from West LB is online with a question.
|
|
|
Ralf
Bauer:
|
I’d
like to ask you two questions related to subprime mortgages in
the
U.S. First are there, did you assume any liabilities in the
course of the sale of the ABN AMRO Mortgage Group? Might there
be any change in terms for the sale of LaSalle if there is a
substantial
change in the risk exposure from the portfolio you hand over?
Thank you.
|
|
|
Hubert
Boumeester:
|
No,
we have no
remaining liabilities as a result of the A subprime portfolio
because it
is not significant in LaSalle. We also have no significant
subprime portfolio exposure elsewhere and the adjustment for
price is on a
dollar-for-dollar basis in terms of the projected net profit
for LaSalle
for ’07 as we published in our section on the U.S. But we’re
confident that that will not come into play.
|
|
|
Rijkman
Groenink:
|
We
were not
(inaudible) prime business in the mortgage business, so when
we sold to
the mortgage businesses we did not unsell subprime
business.
|
|
|
Jean-Pierre
Lambert:
|
Thank
you very
much.
|
|
|
Operator:
|
There
are
no more questions from the phone at this time.
|
|
|
Rijkman
Groenink:
|
Okay,
thank
you very much. Then I’ll ask once more, are there any questions
from the floor? Not that I see of. Thank you very
much all of you for attending this conference call. I hope to
talk to you soon. Thank you very
much.
|
| : |
|
Please
Note:
|
*
Proper
names/organizations spelling not
verified.
|
|
[sic] Verbatim,
might need confirmation.
|
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30, 2007, 3:00 pm Greenwich Mean Time
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