Wealth manager ABN Amro [ABN] struggled in 2003, but it has worked on its domestic business and reaped the rewards. Its Private Client arm in particular has improved significantly on last year. With the right strategy ABN Amro should now be well placed to make inroads into the tough German market.
ABN Amro has released its first quarter results and its Private Clients business unit showed a significant improvement in operating performance compared to the first quarter of 2003. The unit's operating result increased by E72 million, representing almost 46% of the total increase in the group's operating result, to E82 million.
Revenues also increased by 27.2% to E276 million compared to the first quarter of last year, and were driven by higher commissions from improved investor sentiment and better market conditions. The improved contribution from the Dutch private banking operation was particularly noteworthy. This was attributed to improved customer satisfaction following the implementation of a new customer servicing concept, which centers around a segment-focused servicing approach. This approach enables the bank to better match the needs of clients with product/service mix.
Compared to the fourth quarter of 2003, operating expenses increased by E13 million or 7.2%, although this was primarily due to the transfer of NGM France to BU Private Clients and the consolidation of BethmannMaffei (BM) from February 1, 2004. Net profit declined by 12.5% to E56 million, although the lack of tax relief meant that tax took an extra E15 million off the profit compared to the last quarter.
ABN Amro struggled in 2003 as it saw profits fall as a result of expenses. This first quarter result is very positive; ABN Amro has focused on turning around its home market performance and has done well thus far. Going forward, the wealth manager needs to look at keeping its expense under control and growing the presence that it has gained in the German market through the acquisition of BM and its merger with Delbruck. ABN Amro has wisely decided to retain the branding of its two German wealth managers, rather than pushing the little know ABN brand on the tough German market.