Analysts call for more cuts at ABN

Analysts applauded the move to cut the US businesses, which they estimated were losing €100m ($88m) a year, but argued that the bank should go further. They said ABN would be more profitable if it closed more of its equities and corporate finance businesses outside the Netherlands.

This would mean it would focus on its core retail business and limit its wholesale division to fixed income, treasury and commodities operations. In the past year, ABN Amro has also closed its domestic equities business in Japan and cutback its emerging markets equities business with the loss of more than 700 jobs.

One analyst said: 'It would be wise to consider going down the Barclays route.' Barclays Capital is an investment bank focusing on European fixed income and commodities markets.

Another analyst at a leading firm said ABN, which is run by Rijkman Groenink, would be a more viable merger partner for any suitor if it cut its exposure to investment banking. He said: 'The valuation will be higher if they sell it first.'

ABN does not provide numbers for the specific product lines within its wholesale division, but analysts think it is likely to have made money in 2001 in Dutch equities and niches such as prime brokerage. However, it is thought to be losing money in many other areas.

If the bank cut the loss-making third of its equities and M&A business, it could boost its bottom line by about 5%, according to analysts. But investors could push the share price higher, as the move would lift the discount caused by ABN's exposure to investment banking. 'The value upgrade could be rather more, maybe as much as 10%,' said Nick Dove, a banking analyst at UBS Warburg.

Helmut Hipper, a fund manager at Union Investment in Frankfurt, said he would welcome a further withdrawal from investment banking: 'It's difficult to make profits. Its expertise is in retail,' he said.

Analysts do not believe ABN is likely to make any such moves soon. The bank prides itself on being able to offer clients the full range of corporate and investment banking services. Denise Vergot Holle, an analyst at Merrill Lynch, said she did not expect any further big restructurings this year. But she said: 'Maybe it doesn't ultimately make sense for them to have any equities.'

Cutting exposure to investment banking would be in line with ABN's general strategy of focusing on profitable businesses. Fred Rizzo, an analyst at Kelton International, said: 'ABN's on the right track overall. I have a little more confidence in the management than I did a year ago.'

ABN is not the only second-tier bank under pressure. A report published this week from Morgan Stanley and Oliver, Wyman and Co, the management consultancy specialising in banking, said fewer clients are using second-tier banks outside their own country.

Second-tier banks also only manage to sell more than one product to less than a third of their international clients, compared to bulge bracket firms, which sell more than one product to half their clients, according to the report. However, the report adds that corporates reward low-margin, capital-intensive lending with low-margin, capital-intensive debt capital markets business. This suggests that ABN's commercial banking relationships would help if it took on the Barclays model of investment banking.