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7/2/13

The Netherlands: Slice of ABN Thrives in Netherlands - by D. Enrich and M, van Tartwijk

 The ghosts of ABN Amro Group NV are still haunting Europe's banking industry. But in the Netherlands, a remnant of the Dutch lender is enjoying a surprising resurrection under the aegis of the Dutch government.

With roots dating back to 1720, ABN was one of Europe's biggest banks before the financial crisis, with an empire stretching from Europe to the U.S. to Brazil. In October 2007, with an activist investor agitating for its breakup, ABN was sold to a group including the U.K.'s Royal Bank of Scotland Group.

Valued at roughly $100 billion, it was one of the biggest corporate deals of all time. Today, it is widely regarded as one of the worst.

Today's ABN was created in 2009 after Fortis needed to be rescued. The Dutch government mashed together the Netherlands retail-banking businesses of ABN and Fortis. A former finance minister, Gerrit Zalm, was tapped to run the combined bank.

The new ABN was housed in the same Amsterdam building as its namesake—a sprawling headquarters boasting one of the country's biggest collections of contemporary art. But the bank is almost unrecognizable.

The proprietary traders who sat on Continental Europe's largest trading floor are gone. So are many of their colleagues: ABN has eliminated 4,500 jobs—about 15% of its workforce—since 2009 and has said it is planning thousands more cuts in coming years.

One of the main challenges for Mr. Zalm, a 61-year-old pinball aficionado, was the bank's overreliance on short-term funding, which left it vulnerable to liquidity problems in a crisis.

ABN has issued billions of euros of long-term debt and raked in about €20 billion of customer deposits, sharply reducing the bank's ratio of loans to deposits. It also boosted its "liquidity buffer," a pool of safe assets that regulators view as key to insulating banks from crises, to €69 billion last year from €48 billion in 2010.

The task was facilitated by the fact that ABN was wholly owned by the Dutch government. "That has been a huge stabilizer for the bank," said Harald Benink, a professor of banking and finance at Tilburg University in the Netherlands. "It has made it easier for ABN to restore itself"—unlike banks like RBS, which is majority-owned by the U.K. government but is considered an independent entity.

Today, 82% of ABN's income derives from the Netherlands. The bank is starting to return overseas, with private-banking offices in 11 countries. It is trying to build a global cash-management business to serve Dutch companies around the world.

The risk is that ABN's fortunes are now closely entwined with the Dutch economy, which has been showing signs of weakness, especially in its real-estate sector.

Read more: Slice of ABN Thrives in Netherlands - WSJ.com

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