GLOBAL - ABN Amro Mellon customers might become Bank of New York Mellon customers in future, custody experts told IPE.
Currently the the 50/50 ABN Amro Mellon custody joint venture seems to be stuck between two merger negotations - one for a possible merger with Barclays and the other in preparation of the definite merger with Bank of New York.
While ABN Amro Mellon confirmed that both parents are currently in talks about the future of their joint venture, IPE asked two custody experts to give their views on possible developments regarding ABN Amro Mellon.
"Given the BoNY acquisition of Mellon and the potential merger of ABN Amro and Barclays, it appears that the ABN Amro Mellon joint venture cannot continue in it's current form, and will likely become part of the new BoNY/Mellon organisation," Joanne Parker, director at Thomas Murray Investor services said.
She added: "ABN Amro appears to be under pressure to create shareholder value, which adds some further uncertainty to the future of the ABN Amro Mellon joint venture". But she clarified that these merger talks would not greatly influence the custody joint venture.
Similarly, Richard Hogsflesh, R&M managing director, said that a possible ABN Amro Barclays deal was too far removed from the custody business to be of major concern to ABN Amro Mellon customers.
"They should be more concerned about what happens between Bank of New York and Mellon. I think in the long term Bank of New York will seek to acquire the ABN Amro stake in the joint venture," he said.
Meanwhile, in a letter to shareholders, the supervisory and management boards of ABN Amro have unanimously recommended voting against hedge fund TCI's proposals to break up the company and return capital to shareholders.
"We don't believe that a comprehensive break-up of the group, and the sale of growth engines for the mere purpose of generating short-term cash returns will achieve the best sustainable long-term value for our shareholders," the company explained.
"It will result in substantial stranded costs and loss of revenue. This will negatively and significantly impact the residual business mix, with lower returns and a lower sum-of-the-parts valuation."
"Our policy is to continue to return cash to shareholders, in excess of what is needed to invest in the growth opportunities," it added, while pointing at the proposed increase of the 2006 dividend from €1.10 to €1.15. It reiterated its commitment on delivering real earnings per share of €2.30 in 2007.
In addition, ABN Amro confirmed it will refrain from major acquisitions this year, as TCI has demanded. "Such acquisitions will not be consistent with our earnings-per-share target and the announced €1bn share buy-back programme," it made clear.
The bank stressed to see strong potential in its main growth areas: Brazil, Asia and Italy, with newly acquired bank Antonveneta now "firmly integrated into the group".
Moreover, it announced ‘efficiency measures' to improve the operational performance of its business units Europe, North America and the Netherlands, leading to staff reductions in North America and the Netherlands of 900 and 500 respectively.
An increased focus on financial institutions at the business unit, Global Clients, is part of the acceleration of existing initiatives, the bank indicated.
The boards said they will report back to shareholders in six months. The general meeting of shareholders is on April 26.