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The novel matrix-type business structure for corporate banking. Case of ABN-AMRO

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Title: The novel matrix-type business structure for corporate banking. Case of ABN-AMRO


1
The novel matrix-type business structure for
corporate banking. Case of ABN-AMRO

2
Table of contents
  • 1 ABN AMRO
  • ABN AMROs Structure
  • Client Segmentation Product Business Units
  • Profitability, Revenue Control Capital
    Allocation
  • Basel II Risk Advisory Services

3
1
  • ABN AMRO

4
Introduction
  • ABN AMRO is the largest Dutch bank and one of the
    worlds leading financial institutions uniquely
    positioned as number one foreign bank in the US
    Brazil with one of the strongest balance sheets
    in the industry
  • We believe in building strong teams and strong
    relationships. The rich diversity of cultures,
    expertise and experience we possess is harnessed
    to work on behalf of our client base.
  • Our goal is to create value for our clients
    through a constant focus on their financial
    services needs.
  • Our network spans the globe, with over 3,000
    branches in 59 countries and territories, and
    about 100,000 employees
  • We operate in three distinct customer segments
    Wholesale Clients, Consumer and Commercial
    Clients, Private Clients and Asset Management
  • ABN AMRO is now Europes 11th largest bank and
    the worlds 18th largest bank by total assets,
    with a 180-year history of financing
    international trade.
  • ABN AMRO has more than 90 years of experience in
    Latin America with presence in 9 countries with
    more than 30,000 employees in our region.

(1) 31 December 2004 (2) The Banker, July
2004 (3) Federal Reserve Board report on US
offices of foreign banks, April 2005
5
Wholesale Clients Global Network
With specialists in all major sectors and a broad
product range, ABN AMRO has the capacity to
provide local and global execution capability for
complexcross-border deals
North America United States Canada Latin
America Argentina Brazil Chile Colombia Mexico Ve
nezuela
Middle East and Africa United Arab
Emirates South Africa Asia Pacific Australia Chi
na Hong Kong (China) India Indonesia
Japan Kazakhstan Korea (South) Malaysia New
Zealand Pakistan Philippines Singapore Taiwan Thai
land Uzbekistan Vietnam
Europe Austria Belgium Czech Rep. Denmark Finland
France Germany Greece Ireland Italy
Luxembourg Netherlands Norway Poland Portugal Roma
nia Russia Spain Sweden Switzerland Turkey
United Kingdom
Rep offices in Ecuador and Egypt
6
CCC Commercial Consumer Clients network
Asia Greater China India Pakistan Taiwan Indonesi
a Singapore
North America United States Latin America
Brazil Paraguay Uruguay
Europe Netherlands Belgium
Middle East Saudi Arabia U.A.E.
7
Future investments and acquisitions aimed at
growing revenues
THE NETHERLANDS
Top commercial bank for large SME and affluent
clients
THE US MIDWEST
Top ranking US regional franchise
BRAZIL
INDIA GREATER CHINA
Top 3 privately owned bank 1 foreign bank in
Brazil 4 non-state-owned bank in Brazil 5 bank
based on total assets 9 million clients 5,400
branches and mini branches 28,000 employees
New Growth Markets
  • Expanding our sweet spot through growing our
    positions in existing home markets and, if value
    creative, by adding new home markets
  • Improving our product capabilities through
    selective investments

8
ABN AMRO Presence in Latin America
Venezuela Est. 1995 Assets EUR 177mi Employees
60
Mexico Est. 1993 Assets EUR 998mi Employees 80
Brazil Est. 1917 Assets EUR 20bi Branches
2,000 Employees 28,000
Colombia Est.1997 Assets EUR 577mi Employees
120
Ecuador Rep Officer
Paraguay Branches 15 Employees 300
Uruguay Est. 1952 Branches 23 Employees 540
Chile Est. 1995 Assets EUR 870mi Employees 160
Argentina Est. 1914 Assets EUR 237mi Employees
180
Of the 9 countries in Latin America where ABN
AMRO is present, Brazil distinguishes itself with
around 5,400 selling points and full retail
banking capabilities.
9
2
  • ABN-AMROs
  • Global Structure

10
Optimising the execution of this strategy
requires some changes
Old structure...
Managing Board
NL
Brazil
NA
New Growth Markets
PC
WCS
AM
Products
Products
Products
Products
Products
Global Markets
Products
Services
Services
Services
Services
Services
Services
Services
Group Shared Services
Corporate Centre
11
Leading to a more integrated Group structure
Better co-operation and alignment in Commercial
and Consumer Segments to drive growth and
profitability
Managing Board
NL
Brazil
NA
New Growth Markets
PC
WCS
Consumer Segment
A Group Services concept overseeing all services
and operations (BUs GSS)
Commercial Segment
A Group Services concept overseeing all services
and operations (BUs GSS)
Products
Products
Products
Products
Products
Global Markets
Services
Services
Services
Services
Services
Services
Asset Management
Transaction Banking (incl. Trade Finance)
Transaction Banking, a global payments
organisation servicing all BUs
Group Shared Services
Group Functions
12
In-Country Governance for WCS Branches
Country Executive Team
Country Executive
In-Country Value Centre Heads
Chief Operating Officer
Finance
CRO Corporate Centre
OPS
Compliance Corporate Centre
IT
Audit Corporate Centre
Where regulations allow
Property
Legal
Comms
HR
  • Reporting
  • All in-country VC heads report directly to the
    CE on strategic and country related issues.
  • The COO reports to the CE on strategic and
    country related issues.
  • Country Executive functionally reports into the
    VC and into the Regional Network Manager (RNM).
  • CRO, Compliance and Audit functional reporting
    lines to Group Functions

13
3
  • Client Segmentation
  • Product Business Units

14
Global Client Segmentation
  • Three global Strategic Business Units, each with
    clear responsibility for a distinct client segment

Wholesale Clients
Consumer and Commercial Clients
Private Clients and Asset Management
Strategic Business Units
Integrating the banks global corporate and
investment banking activities to serve corporate,
institutional and public sector clients
Focusing on consumer clients and small and
medium-size corporate clients in selected key
markets worldwide
Combining the asset gathering activities of the
private banking and fund management businesses in
an integrated global business
Target client segments
corporate financefinancial markets
advisory equities fixed income foreign
exchange working capital
retail products and services fixed income Foreign
exchange loan products transaction services
investment advisory portfolio management
investment funds international estate planning
trusts
Product and service offerings
Excellence of service to our clients and
leadership in our chosen markets are of paramount
importance to our long-term successs. Rijkman
Groenink, Chairman of the Managing Board
15
Wholesale Clients Business Units
Our sector specialists play a proactive role
in developing relationships with clients,
establishing a thorough understanding of client
business objectives and challenges work
closely with our product experts to establish the
best mix from our full range of products and
services That means we always offer advisory and
financing responses custom-cut to the needs of
the client
Healthcare Chemicals
Industrials
Integrated Energy
Telecom, Media Technology
16
Product Business Units
  • Wholesale the best of both worlds
  • As a wholesale bank, we offer a full spectrum of
    products of both investment banking and
    commercial banking products to our chosen clients
  • Customised product offering
  • Our client-facing teams work proactively to
    develop a strong relationship with our clients,
    establishing a thorough understanding of their
    objectives and challenges. They work together
    with our product experts to tailor made the
    advisory and financing solution that suits you
    best our customer base

17
Corporate client service model
Client
  • Our Coverage delivers key benefits to clients
  • A single point of contact - a gateway to all of
    the banks products
  • Client-centric model streamlines product delivery
    and commitment times
  • Feedback loop to ensure consistent quality of
    service

Relationship banker
continuous communication
service delivery
Products
Co-ordination
  • corporate finance
  • equity capital markets
  • equities
  • private equity
  • fixed income
  • FX futures
  • working capital

Capital allocation
Sector expertise
18
Focus on mid-market segments will lead to
profitable revenue growth
  • Focus on mid-market segments in which we have a
    strong and distinct competitive advantage
  • Focus will lead to further improvement of product
    offering and optimisation of service delivery for
    our mid-market clients
  • Profitable revenue growth to be achieved by
  • adding new clients to our mid-market segments
  • in existing home markets
  • by entering new home markets
  • enlarging share of wallet of our existing clients
    in the mid-market segments
  • by better leveraging product capabilities

19
4
  • Profitability,
  • Revenue Control
  • Capital Allocation

20
Wallet Sizing - How to measure client potential
  • Wallet sizing is the exercise of estimating, via
    client interviews and market data, how much is
    the total amount of financial services to be
    acquired by a client.
  • After establishing the wallet potential the
    client service team estimates how much of this
    wallet could be won and which strategy need to be
    set to achieve it.
  • After agreeing on the client strategy joint
    targets are set by the relationship manager and
    the product teams that will be the basis of their
    performance review
  • Client results are tracked via a MIS system that
    recognizes 100 of the revenues for the
    relationship manager despite of the product or
    country where it is booked.
  • Capital Credit decisions are made taking in
    consideration such wallet exercise among other
    metrics like Economic Profit, Rating outlook,
    Sector concentration etc...
  • Main benefit of such wallet exercise is to be the
    basis of a client led strategy that emphasiszes
    long term relationship gains instead of short
    term product returns.

21
Economic Profit as Fundamental Driver
Economic Capital (EC) The economic capital
expresses the risk on the transaction. Given a
confidence level of 99.95 (equates to a A-
rating), it is the maximum amount of loss likely
to occur. It is determined using Monte Carlo
simulation that allows for incorporation of
portfolio specific features such as
diversification by region and industry sectors.
  • Credit Income (Revenue on Facility or
    Relationship)
  • - Operating Costs (Per Performance Contracts)
  • - Provisions for Loan Losses (Expected Loss)
  • - Taxes (_at_33)
  • Net Income
  • - Capital Charge (Ke Economic Capital)
  • Economic Profit (EP)

RAROC Net Income / Economic Capital
22
Capital Allocation - Governance Structure
Global Capital Management Committee (GCMC)
  • Guiding Principals
  • Total capital pot allocated per Region via a
    Steering Committee
  • Capital reallocation per region effected by way
    of GCMC recommendation
  • Capital pots per country allocated by Regional
    Capital Allocation Committee (CAC)
  • Capital deployed via scheduled Regional and
    In-Country CACs
  • No incremental capital to be allocated to client
    relationships generating revenue lt EUR 25 thd /
    exceptions considered case-by-case / new
    relationships must generate EUR 25 thd in year
    one.
  • Defined decision rights for Regional and
    In-Country CACs
  • Risk Weight Assets to be managed globally across
    all business units by Portfolio Strategy
    Execution
  • Where capital relates to a sector in breach of
    global portfolio parameter a special allocation
    approval is required
  • Dedicated resources, like compliance risk
    portfolio management officers, will be put in
    place to manage the capital allocation process in
    conjuction with the business areas

23
Revenue Control - Shadowing
Commercial vs. Product View
Client View
Booking Country View
Total Clients Revenues
Total Countrys Revenues
Reports
Senior RBs
Country Reps Network Manager
Global Product Heads SRBs
Users
24
5
  • Basel II
  • Risk Advisory Services

25
Overview of Basel II
  • Basel II is all about creating a better link
    between regulatory capital and risk and enhancing
    market discipline through more detailed
    disclosure.
  • The main business benefits for the bank are
  • further improvement in our risk management
    processes,
  • the potential for lower capital charges,
  • greater insight into risk adjusted pricing,
  • capital allocation and active portfolio credit
    risk management.

26
Risk Advisory Services
  • ABN AMRO employs more than 700 risk professionals
    in 58 countries, and possesses some of the most
    advanced risk management systems of any financial
    institution in the world
  • The Bank is among the global leaders in managing
    the Basel II evolution, witnessed by the
    membership of our CFO, Mr. Tom de Swaan, on the
    Bank Liaison Committee of the Basel Committee
  • Through its dedicated Risk Advisory Services
    group, ABN AMRO is able to share its risk
    management and Basel II expertise with select
    clients
  • Risk Advisory Services offers a holistic, market
    driven approach to Basel II Advisory. The
    offering covers Operational, Credit and Market
    Risk management
  • ABN AMRO is positioned to offer a unique solution
    based on our own experience as practising in
    banking and risk management. ABN AMROs
    practitioner-to-practitioner approach is a
    practical alternative to the systems-based
    offerings of other Basel II consultants

Our strategic goal of becoming Basel II compliant
under the Advanced IRB approach is supported by
our own renowned risk practitioners ABN AMRO
commitment to risk management is recognised by
leading rating agencies and industry publications

27
Risk Advisory Services
ABN AMROs global footprint as a financial
institution, coupled with strong relationships
with financial institution and public sector
clients, ABN AMRO is able to deliver a unique
advisory offering
helping us build a commercial reputation for
transferring that know-how to select clients
Our own experience as global practitioners have
created a wealth of internal risk management
know-how
Advisor for Derivatives Trading Set-up and ORM
implementation Feb 05, May 02 (respectively) -
present, Indonesia
Advisor for Risk Management Training
Programme June 2005 - present, Egypt
28
Questions? Thank You!
29
Curriculum Vitae
  • Carlos Braga is the Regional Network Manager for
    Spanish Speaking Latin America. Responsibilities
    include the coordination of the Banks WCS
    activities in Argentina, Chile, Colombia,
    Venezuela, Ecuador and Mexico. He brings to ABN
    AMROs customers a diversified background as Head
    of Financial Markets Latin America Business Unit
    (2002-2004), Head of Loan Products Latin America
    group (2000-2002). Prior to this posting Mr.
    Braga held several postings in the product
    corporate bank areas of ABN AMRO in Brazil and
    US. Mr. Braga joined ABN AMRO Bank in 1988.
  • Mr. Braga received his Degree in International
    Trade Management from UCLA and his MBA from the
    Instituto Brasileiro de Mercado de Capitais
    (IBMEC), Rio de Janeiro. Mr. Braga also has a
    Degree in Economics from Facultade Candido Mendes
    and a Management Corporate Resources Degree from
    IMD in Switzerland.

CARLOS BRAGA Executive Director Regional
Network Manager Latin America Tel. 55-11-3174
7475 fax. 55-11-3174 7477 e-mail
carlos.braga_at_br.abnamro.com
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