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Was ABN a calamitous mistake for RBS?

As time goes on, it certainly looks like it.

As well as begging for an additional 12bn from shareholders, RBS is now being forced to chop 7,000 jobs, or 25% of the combined workforce, as it struggles to integrate its global markets division with ABN’s investment bank.

When the merger was mooted, RBS put an estimated €2bn of cost savings from the combined investment banking divisions at the heart of its strategy. But with investment banking business now down the pan, the necessary cost savings and job cuts look set to go a lot deeper.

To make matters worse, RBS paid top dollar for ABN at the top of the market. The Dutch bank then wrote down €1.6bn ($2.4bn) on its global markets business in the fourth quarter of 2007, and has accounted for a third of RBS’s credit market writedowns so far, according to Creditsights – making it a ‘very expensive purchase’.

Other banks have made expensive mistakes in the past – take Credit Suisse’s ingestion of DLJ in 2000. But RBS’s acquisition of ABN looks like the worst yet.

Feel free to agree, or not, below.

Comments (16)

Comments
  1. Who really thought that buying ABN was a good idea in the first place?

  2. RBS surely wants to take up a larger market share in asia, and abn is a good stepping stone. of coz now everyone says in hindsight that buying abn was a wrong decision. but if the market wasnt that bad, everyone again will be saying its a good buy

  3. Having worked for both banks the real attraction for RBS was ABN’s international payments platform. RBS didn’t have the ability to develop this organically and with it the franchise is far more attractive to customers who manage cash globally. RBS can now claim to be a true global player with real branch presence in the countries that matter. The rest of ABN’s wholesale business was just surplus to requirements – so yes, RBS paid over the odds to keep Barclays off its patch.

  4. Aha, you see RBS should have let us have ABN

  5. I think the real motive was AS LONG AS BARCALYS CHAP DOES NOT GET IT WE WILL …. and they were right, the real benefit will materialise in 2-5 years COSTS come now so PATIENCE PATIENCE PATIENCE and let time tell !!! PS The worst deal was Citigroups extravagance global brand building exercise VERY CREATIVE and VERY DISAPOINTING …Synergy anybody ??? Or illusions of grandeur YOU decide !!!

  6. having worked at abn and now at the ‘original suitor’ im glad they didnt get abn. a bullet saved is just as valuable!

    Off2original suitor Reply
     
  7. RBS paid in cash for an asset which has lost value since…it will lead to the demise of Fred Goodwin…its not hard to work out…

  8. I feel sorry for those ABN folk who aren’t minted enough yet and whose only prospect is working in an uncertian job at a sweaty Bank such as RBS. Fortunately for me, I am a stage of life with no mortgage and long cash/assets and hence can idly sit here waiting for a final pay-off (on top of the bonuses already received)

  9. Ha ha ha ha

  10. To Al, Debt/ Fixed Income
    You don’t mind lending us a loan as I am not as flush as you.

  11. The true winner in the ABN deal was Santander, as after purchase & sales of certain assets has become a huge player in probably the most promising BRICK economy (Brasil)

  12. @al debt/fixed income…. are you single?

  13. You should look at Italian market to really appreciate Santander’s genius

  14. You’ve got to admire those canny Dutch for selling out at the top of the market and now looking forward to being paid off under the generous Dutch employment laws. ING and Rabo folk may well reflect that the rewards for survival are not as handsome.

  15. anonymous, capital markets – in reply to your question, yes, i am.

  16. ABN hAS AND ALWAYS WILL BE A A BANK THAT NEVER REALLY KNEW WHAT THEY WERE DOING WITH SO MANY WRONG MANAGEMANT DECISIONS IN THE PAST…THEY WERE ALWAYS GOING TO BE SOLD TO SOMEONE EVENTUALLY. ESPECIALLY IN ASIA THEY WERE A BANK THAT THE MANAGEMENT IN EUROPE LET RUN THEMSELVES AND DIDNT CARE WHAT HAPPENED.

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