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ABN AMRO
“Well positioned for growth”
Rijkman Groenink
Chairman of the Managing Board
New York, 10 December 2004ABN AMRO Benelux Conference
2
Agenda
Strategy and YTD 2004 results
Challenges & Opportunities in 2005
Cost and revenue synergies
Concluding Remarks
3
Successful Multi-Regional Strategy
We aim to drive our shareholder returns through a multi-regional strategy with a focus on commercial and consumer banking, supported by an international wholesale franchise We will achieve this by:
1. Focusing on consumer and commercial clients in chosen home markets, selected
wholesale clients with an emphasis on Europe, as well as financial institutions
and private clients
2. Creating value for our clients by offering high-quality financial solutions that best
meet their needs and long-term goals
3. Leveraging our advantaged product and people capabilities to the benefit of all
our client bases
4. Sharing expertise and operational excellence across the Group
5. Creating ‘fuel for growth’ by optimally allocating capital and talent
4
Network of leading market positions
All figures based on Brazilian GAAP
TOP 4 PRIVATELY OWNED BANK IN BRAZIL
TOP RANKING US REGIONAL
FRANCHISE IN THE MID-WEST
EUROPEAN PRIVATE BANKING:# 1 Netherlands# 3 France and Germany
Top 8 US mortgage servicer
WCS European franchise with top 3 Global Trade and Cash & Payment platform
NETHERLANDS:Top commercial bank for large SME and affluent customers
Source: SNL financials
INDIA Growing mass affluent retail franchises (15 branches)
GREATER CHINA Focus on Hong Kong and Taiwan
5
YTD increase in net profit due to higher revenues and lower provisioning
Gain on sale BoA is EUR 213 mln (revenues, operating and net profit)
Underlying revenue growth of 4.1% reflects diversity of business mix
Increase in operating expenses reflects investments in growth markets
Strong risk management skills has resulted in lower provisioning
Further strengthening of capital ratios
* At constant forex rates: **Excluding the proceeds of the sale of Bank of Asia (BoA)
Nine months
(EUR mln) 2004 2003%
change%
change*
Total revenue** 14,055 13,932 0.9 4.1
Operating expenses 9,502 9,252 2.7 5.7
Operating result** 4,553 4,680 (2.7) 0.9
Provisioning loan losses 456 951 (52.1) (50.5)
Net profit** 2,759 2,304 19.7 24.3
Efficiency ratio**
Tier 1 Ratio
67.6%
8.50%
66.4%
7.79%
2304
2759
213
1000
1500
2000
2500
3000
YTD 03 YTD 04
Gain on sale of Bank of Asia
Net profit adjusted for gains on sale of Bank of Asia
19.7%
29.0%
6
YTD revenue growth, despite decline in BU NA
Despite significant one-off in 2003, revenues
BU NL show only modest decline. Adjusted for
one-off: + 2%
Strong performance BU Brazil due to
Sudameris acquisition and organic growth
Strong results BU NGM due to high growth
rates in Asia
WCS shows satisfactory results in difficult
market conditions
Group revenues are up 4.1% at constant
exchange rates
1%
19%
4%
-3%
-23%
23%
19%18%
25%
29%
-30%
-20%
-10%
0%
10%
20%
30%
40%
NL NA Br NGM Bw fds WCS PC AM Other AA
Revenues excl. gain on sale Bank of Asia
Change in revenues (Q3 YTD 04 vs Q3 YTD 03, %)
7
YTD revenue decline in BU NA entirely due to lower mortgage income Revenues US mortgages and total BU NA revenues excl. mortgages (in mln USD)
1160
404
0
200
400
600
800
1000
1200
1400
YTD 03 YTD 04
Revenues US mortgages
-65%
28042941
0
500
1000
1500
2000
2500
3000
3500
YTD 03 YTD 04
Total BU NA revenues excl. mortgages
+5%
8
YTD increase in expenses due to investments in growth markets
Strong increase in expenses in BU Brazil (EUR
220 mln or 30%) largely due to integration
Sudameris
Increase in BU NGM (EUR 31 mln or 12%) due
to investments to fund future growth
Lower expenses BU NA and BU NL fund
increase in NGM and Brazil
-200
-150
-100
-50
0
50
100
150
200
250
300
NL NA Br NGM Bwfds WCS PC AM Other AA
Change in expenses (Q3 YTD 04 vs Q3 YTD 03, EUR mln)
9
Strong risk management skills have led to lower provisioning
*2004 YTD
Net provisioning as % average RWA
51 53 51
23
35
28
44
2824
52
66
29
55
20
40
60
80
100
19921993 199419951996 199719981999 200020012002 20032004
51 53 51
23
35
28
44
2824
52
66
29
55
20
40
60
80
100
1993 199419951996 199719981999 200020012002 20032004*
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
2000 2001 2002 2003ABN AMRO Market Performance
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
2000 2001 2002 2003ABN AMRO Market Performance**
Loan Loss provisions to Loans**
** Barclays, HSBC, Citi, BNP Paribas, Bank One, JP Morgan Chase, Deutsche
10
Further increase of Tier 1 ratios due to proceeds of sale of Bank of Asia
Sale of Bank of Asia (BoA) added 15bps to
Tier 1 and Core tier 1
Sale of LeasePlan Corporation (LPC) has been
completed on 4 November
Proceeds of sale of LPC will lead to a further
increase in the Tier 1 and Core Tier 1 ratio
We have used the proceeds of the sale of BoA
and LPC to neutralise the dilutive effect of the
interim stock dividend 2004. On 2 December
we announced the completion of the buyback
of shares related to the interim stock dividend
2004
4.47
4.92
5.91
6.28
7.03
7.48
8.158.50
4.00
5.00
6.00
7.00
8.00
9.00
Dec 01 Dec 02 Dec 03 Sep 04
Core Tier 1 ratio (%) Tier 1 ratio (%)
11
2004 outlook
“We reiterate our net profit outlook for the full year to be at least 10%
higher than the previous year (excluding the impact of the sale of
Bank of Asia and LeasePlan Corporation), in spite of the lower
operating result now expected.”
13
Challenges Opportunities
USD net profit hedge rate for 2005
lower than for 2004
2004 results include some incidental
items
Disappearance of LeasePlan and Bank
of Asia contribution
BU NA: growth in all divisions,
commercial banking in particular
BU NL: gradual profitability
improvement
BU Brazil: well positioned post
Sudameris
BU NGM: underlying market growth
WCS: further growth from a solid base
Private Clients growth depending on
market circumstances
Disciplined Capital Management
14
#3 Market Share in the greater Midwest
13th largest in the U.S. by assets
11th largest commercial loan portfolio nationally
14th largest deposit base in the Nation
8th largest mortgage servicer in the Nation
Before considering the effect of expected industry mergers.
Sources: SNL Securities, Mortgage Bankers Association, FDIC and American Banker
BU NA is well positioned for solid growth in all its divisions
USD 103 bn in assets
15
– Trusted and respected
– Relationship-focused
– Involved in the Community
Local, Hometown banks
Strong positions in Illinois and Michigan
LaSalle Bank N.A.
# 2 in Assets in Illinois
# 2 in Deposits in Illinois
Standard Federal Bank N.A.
# 2 in Assets in Michigan
# 3 in Deposits in Michigan
16
Opportunity: increase commercial banking revenues in BU NALoan commitments (USD) and utilisation rates (%)
21
23
25
27
29
31
33
35
37
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04
42%
44%
46%
48%
50%
52%
54%
56%
Total Loan Commitments (USD bn)
Net loans as % of total commitments
Commercial & industrial loans (C&I) and IP
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Jan-80 Jan-85 Jan-90 Jan-95 Jan-00
C&I loans Industrial Production
Oct 04
17
Customer Centric Strategy
BU NA’s new consumer strategy will lead to strong revenue growth
Customer Service
Provide superior service
across all channels
(branches, ATMs, call
center, Web, sales
forces)
Adapt to the local needs
of our marketplaces
Empower employees to
solve customer
problems
Sales
Acquire core deposit
accounts to develop long-
term customer
relationships
Sell products and
services to each
customer based on the
customer’s unique needs
Ensure products and
services are easy to
understand and sell
Operations
Abolish rules and
procedures that interfere
with delivering
exceptional service
Continually look for ways
to reduce errors, improve
response times and
anticipate customer
hassles
Efficiently use resources
to achieve customer
satisfaction
18
US mortgage business is expected to benefit from margin normalisation
US mortgage business expected to
improve in 2005:
Overcapacity in the industry has
resulted in a sharp reduction in margins
This overcapacity has been sustained
by mini-refinancing booms as interest
rates have remained low.
We expect a rationalisation of the
margin environment in 2005
29%
12%
7%
2%
0%
5%
10%
15%
20%
25%
30%
35%
YTD 03 YTD 04
BU NA mortgage revenues as % of BU NA revenuesBU NA mortgage revenues as % of Group revenues
19
We can grow revenues and increase returns by focussing on certain client segments:
Corporate Clients:Sustain market leadership position (>40% market share) by maintaining an advantaged service offer
SME Clients:Move from #2 to #1 in terms of market share of primary bank relationships for companies with over EUR 1 mln turnover by improved product offering
Mass Affluent Clients:Introduction of Preferred Banking, which improved service and product offering
Mass Retail Clients:Introduce charges for standard banking services and actively migrate clients to low cost channels.
Opportunity: BU NL is expected to show revenue growth
20
BU NL efficiency ratio expected to improve further to low 70’s in 3 years
Efficiency ratio BU NL*
* Q1 03 is adjusted for sale of insurance business to DL, Q2 03 is adjusted for share loss in Interpay and release of accrued provisioning, Q4 03 for the unwinding of the security vehicle and EUR 23 mln restructuring costs, and Q3 04 is adjusted for release of a cost provision (16 mln)
86.7
92.4
84.0 84.5
81.5
84.8 84.7
77.9
83.6
78.9 79.5 80.1
77.2 77.075.7
70.0
75.0
80.0
85.0
90.0
95.0
Q1 01 Q3 01 Q1 02 Q3 02 Q1 03 Q3 03 Q1 04 Q3 04
21
The efficiency ratio of the Group’s operations in the Netherlands is lower than that of BU NL
* Geography the Netherlands includes Dutch activities in SBU C&CC, SBU WCS, BU PC, BU AM, BU CC, Bouwfonds
77.6
72.3
68.265.8
86.9
82.2
75.3 76.0
50
55
60
65
70
75
80
85
90
2001 2002 2003 2004
Geography The Netherlands BU NL
22
Opportunity: Brazil is well positioned for organic growth after Sudameris integration
Exposure to the South East, Brazil’s most dynamic region
Market leader in car finance
Above average penetration of the mass affluent client base
The catalyst for value creation : economic growth fostered by structural reforms and sustainable low interest rates leading to retail and commercial loan growth
Following the Sudameris acquisition, ABN AMRO is the 4th largest privately owned bank in Brazil with attractive characteristics
23
BU Brazil shows strong loan growth in retail and commercial banking
Growth of segments of the portfolio (BRL mln)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Commercial Banking Aymore Retail
Q3 03 Q2 04 Q3 04
24
Since the acquisition of Banco Real the client base increased by more than 50%
5.66.2
6.8 7.1
8.38.8
0
1
2
3
4
5
6
7
8
9
10
Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Aug-04
Clients (mln)
Includes Sudameris as of October 2003 (approx. 700,000 clients)
25
Opportunity NGM: continuing strong growth in NGM Asia
Breakdown of revenues YTD 2004 (EUR mln)
6063 65 67
8387
91
0
10
20
30
40
50
60
70
80
90
100
Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04
Revenues NGM Asia
NGM Other36%
NGM Asia64%
NGM Asia includes Greater China, India and EGMNGM Other includes Saudi Hollandi Bank, ID&JG, NBM
Revenue development NGM Asia (EUR mln)
26
Attractive Characteristics of Greater China and India
Greater China and India represent a large, fast growing and profitable opportunity in Asia for ABN AMRO
Rapid growth of Personal Financial Services Revenues coupled with weak incumbent competitive offerings, customers willingness to switch providers and easing of regulations for foreign players
ABN AMRO Focus on Greater China and India:
Target (Mass) Affluent Customers with:
1. Van Gogh Preferred Banking Offering
2. Credit Card Offering
3. Consumer Credit Offering - Primarily India
27
WCS can grow from a good base
83% of total WCS revenues is client related
WCS is an important source of product knowledge for C&CC
A stable business mix
New initiatives are drivers for future growth (WoCa)
– further insourcing
– further efficiency improvements
529623
708
-152
224
542
-400
-200
0
200
400
600
800
YTD 02 YTD 03 YTD 04
Operating result Net profit
28
BU Private Clients continues to build up its on-shore network
ABN AMRO Private Clients ranks among the world’s top 10, with EUR 114 bn assets under administration (AuA)
In The Netherlands, we are the clear market leader
In France, we are a leading private bank, well positioned after restructuring completed in 2003
In Germany, we are building a leading position via the integration of Delbrück Bethmann Maffei into ABN AMRO Private Banking
Further acquisitions in Europe to build up onshore Private Banking Network.
29
Disciplined capital management (1)
Excess capital is a new experience for ABN AMRO
The Managing Board considers that its main task on behalf of ABN AMRO’s shareholders is long term value creation by investing capital in attractive growth opportunities
In accordance with our capital discipline and with the capital ratio targets, we will give capital back to our shareholders, if no value creating opportunities can be found
Share buy-backs are now an option
30
Disciplined capital management (2)
Europe is unlikely to see significant cross border activity in the short-term
No further acquisitions in Brazil as we are well positioned for growth after the Sudameris acquisition
In Asia, acquisitions in India and Greater China could accelerate the already rapid organic growth
Longer-term, regional consolidation may require us to expand our US franchise
32
GSS - vehicle for delivering cross-SBU operational synergy opportunities
Restructuring programmes to date concentrated within (S)BUs, focus is now on broader agenda of cross-(S)BU synergies
Group COO, GSS and Group Business Team (GBT) established Jan 2004 to realise (S)BU synergies
Real opportunity to deliver step-change in performance across Services cost base of ~EUR 5bln
Benchmarking against top-quartile banks revealed significant potential to take out costs
Current estimates point to at least EUR 500 mln annual savings from 2007 onward
33
Synergies between C&CC and other BU’s to further increase
C&CC and WCS
WCS product expertise is used to create innovative products for commercial clients
C&CC and Private Clients
Improved co-ordination makes it possible to manufacture innovative private banking products
C&CC and Asset Management
Asset Management products are streamlined to closely fit the C&CC clients needs
WCS and Asset Management
Co-operate to leverage the WCS client base for Asset Management products