ABN Amro Produces Top Returns as Bank Becomes Target

ABN Amro Holding NV Chief Executive Officer Rijkman Groenink, who 10 months ago said he was willing to sell the Dutch bank, is helping investors to reap a bonanza.

Shares of ABN Amro surged 9.7 percent in Amsterdam yesterday to a record after London-based Barclays Plc approached the company about a possible takeover. The stock is the best performer this year in the 72-member Bloomberg Europe Banks and Financial Services Index, climbing almost 23 percent.

The potential for an acquisition of the biggest bank in the Netherlands has more than overcome Groenink's failure to meet the targets for shareholder returns that he established six years ago when he said the company would rank among the top five of the world's 20 biggest banks. ABN Amro is now 16th by his measure.

``The pressure on Groenink is increasing enormously,'' said Yolande van den Dungen, who helps to manage the equivalent of about $3.3 billion at SPF Beheer in Utrecht and owns shares of the company. ``ABN Amro's strategy has lacked speed and clarity.''

London-based TCI Fund Management last month called for a breakup of the bank and then Toscafund Asset Management LLP of London urged ABN Amro to consider a merger.

Barclays, the U.K.'s third-biggest bank, and ABN Amro said yesterday in separate statements that they're in early talks about a possible combination in what would be the world's largest financial-services acquisition.

`Right Price'

Spain's Santander Central Hispano SA and BNP Paribas SA and Societe Generale SA of France also may be interested in bidding for ABN Amro, which has a market value of 57 billion euros ($76 billion), analysts said.

The 57-year-old Groenink said in an interview last May that he would consider selling the bank at the right price. ``If somebody came to us with a very good story and offered a 40 percent premium on our share price, then I don't think I'd have any serious argument to say no,'' he said. ABN Amro officials declined to comment yesterday beyond the statement.

Shares of ABN Amro rose 2.65 euros to 29.94 yesterday. The stock advanced at an annual rate of 12.7 percent during the past five years, beating the 9.9 percent increase of the Bloomberg banks index.

Geographic Mix

ABN Amro now spreads from the Netherlands to Italy, the U.S. Midwest and Brazil, its four largest markets. It employs about 110,000 people worldwide with more than 4,500 branches in 53 countries. The company reported a fourth-quarter increase in earnings of 4.9 percent after asset sales made up for expenses from last year's purchase of Italy's Banca Antonveneta SpA and loan losses in the U.S., Latin America and Taiwan.

``Lots of banks are likely to see an opportunity to fill some gaps in their geographic mix by buying certain units of ABN Amro,'' said Dirk Peeters, a Brussels-based analyst at KBC Securities, who has an ``accumulate'' investment rating on the company. ``ABN Amro's value lies in its geographic footprint, not specific products or niche markets.''

In addition to Barclays, Paris-based BNP Paribas and Societe Generale are among banks that have shown interest in ABN Amro, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter. Officials at BNP Paribas and Societe Generale declined to comment.

ABN Veteran

Groenink, the son of a school doctor, took charge of ABN Amro in 2000. A 26-year veteran of the bank, he was previously responsible for the Dutch unit.

He measures performance against 20 banks including New York-based Citigroup Inc. and Dutch rival ING Groep NV. The best ABN Amro has done in shareholder returns over a four-year period was seventh from 2002 to 2005, according to ABN Amro's Web site.

``Groenink's fortunes changed rapidly,'' said Corne van Zeijl, who oversees the equivalent of $1.2 billion at SNS Asset Management in the Dutch town of Den Bosch and owns shares of ABN Amro. ``A year ago he was named CEO of the year for his acquisition of Antonveneta and now some people are counting his days as CEO.''

According to hedge fund managers at TCI, ABN Amro's assets aren't yielding their full potential and ``will lead to a lack of competitiveness, which will penalize both the stakeholders and the shareholders.''

Stichting Pensioenfonds PGGM, the retirement plan for Dutch health care and social workers, last month said it agrees with ``most of the points'' that TCI raised. TCI owns more than 1 percent of ABN Amro. PGGM declined to disclose its stake.

Groenink said in January that he wasn't surprised to see his name on a list of CEOs in the Netherlands most likely to step down in 2007. Some units will have to show ``a much better operational performance in 2007,'' Groenink said at the time.

source:www.bloomberg.com