KEY POINTS

  • ABN posted an overall net loss of 5 million euros ($5.9 million) in the second quarter
  • Shares have plunged about 47% so far this year.
  • ABN  said it will strategically focus its operations in northwest Europe

Dutch bank ABN AMRO announced on Wednesday that it will eliminate its trade and commodity financing businesses – following a series of losses.

The bank will also conduct a restructuring that will result in the elimination about 800 jobs over the next three or four years at its business banking unit, Corporate and Institutional Banking, or CIB, or about one-third of that division’s workforce.

ABN posted an overall net loss of 5 million euros ($5.9 million) in the second quarter. In the first quarter, ABN recorded a loss of 395 million euros ($466 million).

ABN also said it will strategically focus its operations in northwest Europe, while exiting the U.S., Asia, Australia and Brazil, excluding its clearing operations.

“We are overexposed to global sectors”  new Chief Executive Robert Swaak said. “Going forward [CIB] will focus on clients in Northwest Europe and [the] clearing [business] will exit all non-European corporate banking activities. Trade and commodity finance activities will be discontinued completely, and natural resources and transportation and logistics will focus on European clients only.”

ABN shares have plunged about 47% so far this year.

The company also noted it will emphasize “green deal” financing in support of the European Union’s plans to develop renewable energy.

ABN is 56%-owned by the Dutch government.

“The new CEO has essentially delivered what we asked for over a year ago, namely a proper wind-down of the CIB business. A pity that it took a pandemic to do so,”  Barclays analyst Omar Fall said, according to Bloomberg. “The focus will now be on how much of the very sizable 2.5 billion euros [$2.94 billion] of CIB wind-down capital will eventually return to shareholders.”

Reuters reported that the bank has also been stung by losses in offshore energy markets.

“This has been the higher risk and more volatile part of the bank, which is why we are choosing to wind it down,” Chief Financial Officer Clifford Abrahams said.

In the first half of the year, write-offs reached 1.4 billion euros ($1.65 billion) – up from 128 million euros ($151 million) in the first half of last year, partly due to souring oil and gas sector loans, particularly in Asia. ABN was particularly exposed to Singapore-based Hin Leong Trading, a firm that admitted concealing hundreds of millions of dollars in losses.

Abrahams also said “it’s a tough decision” to exit the trade and commodity finance businesses

“We’ve been in these businesses in some cases for hundreds of years. It’s tough for our clients and our staff, but we are convinced it’s in the best interest for the bank,” he added.

A number of other European lenders – including France’s Natixis and BNP Paribas – have also scaled back their trade and commodity finance operations and moved to green finance initiatives.

ABN was also hurt by its exposure to the massive fraud at German fintech firm Wirecard which has since gone bankrupt.

Referring to Wirecard, Abrahams said: “We don’t comment on specific clients, but the exceptional client file that caused high impairments reflect a potential fraud case in Germany.”