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Dutch lender ABN Amro pulls out of commodity trade finance

posted onAugust 13, 2020
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Amsterdam-based ABN AMRO Bank NV announced on Wednesday (Aug.12)  that its trade and commodity finance activities will be “discontinued completely,” as it reported the net loss for the second quarter was €5 million. 

According to the official statement, the Dutch lender wants to focus its business division on regions in Europe "where scale can be achieved and hopes that the downsizing of business activities will reduce the risk of financial setbacks."

The business division has approximately 2,500 employees in total. The massive overhaul will see the bank cut 800 jobs and  and the whole process will take three to four years.

“We will serve clients in segments where we can achieve scale, so we will focus on the Netherlands and Northwest Europe, where we will invest and grow ”Robert Swaak ABN AMRO CEO commented.

The Dutch bank’s exit follows similar retreats by France’s Societe Generale SA, BNP Paribas, 
Natixis and Australia and New Zealand Banking Group (ANZ) who restructure or reduce their commodities business to cut risk. 

Earlier this month, Societe Generale confirmed it was closing its trade commodity desk in Singapore after being hit by Hin Leong’s accounting scandal. Oil trader Hin Leong which filed for bankruptcy debts total some $3.b billion including $240 million with Societe Generale. 

Last week, it was reported that BNP Paribas, among the top 10 trade finance banks, would also scale back its commodity trade finance business following losses. 

Natixis has changed its structure and shifted to greener finance initiatives while ANZ  froze new commodity finance deals after a series of heavy losses. 

ABN AMRO has a long history of lending vital short-term finance to trading houses. But the global economic shock of the COVID-19 has driven most commodity prices down with commodities associated with transportation, including oil, having experienced the steepest declines. The historic decline in fuel demand has also changed the landscape for lenders to commodities traders. 

The bank reported a net loss of 5 million euros for the second quarter in 2020 compared with a profit of 693 million euro for the year-earlier period. Provisions for loan losses declined to 703 million euros compared with 129 million euro for the second quarter in 2019. 

Client loans decreased by 5.0 billion euro compared with Q1 2020, totalling  247.3 billion euro n at 30 June 2020. The decrease mainly reflected a decline in corporate loans. Furthermore, corporate loans at Commercial Banking declined mainly due to lower demand in the current economic situation.

The lender's financial position remains strong, with a CET1 ratio-a measure of a bank's financial strength-of 17.3% under Basel III, around 14% under Basel IV, comfortably above the regulatory minimum requirement. 

Shares in ABN AMRO, which is majority controlled by the Dutch government, were up 8.08 % on Wednesday (Aug.12).