Governmental support, selective though it has been, has been vital in keeping Benelux banks back on their feet in the past year. Now, with the worst seemingly over, banks are regaining their strength, and the main focus of wholesale banking businesses appears to be building a strong domestic presence. To accomplish this, banks are working hard to forge long-lasting relationships with regional corporates. Savita Iyer-Ahrestani reports.
Home is where the heart is – at least as far as Benelux banks are concerned. Visibly shaken by the earth-moving events of the credit crunch, many banks in the region are redoubling their efforts to strengthen in their domestic markets. “We will be building market share by allocating resources in terms of equity, capital markets and advisory services for core clients in Holland and Belgium,” said Bill Connelly, global head, wholesale banking clients. at ING in Amsterdam. “In terms of both domestic and wholesale banking, our focus is the Benelux and Central and Eastern Europe, where we also have a broad mandate.”
At the end of Q2 ING posted a net profit of €229m – a remarkable improvement, after its €305m loss at the end of Q1. It is well placed to become the leading bookrunner for investment grade bond issuance in Benelux, said Connelly. Corporate bond issuance has had a stellar run this year, as companies seek long-term funding while reducing their dependence upon bank loans. ING is positioning itself to fill the vacuum left by ABN AMRO, he said.
Beyond The Netherlands, ING faces competition from BNP Paribas, which is taking over Fortis Belgium. “BNP Paribas has a lot of very good corporate contacts and is very strong, naturally, in France, so one can expect that they will take the larger market share in the Belgian corporate space,” said one analyst. But its domestic strength stands it in good stead. “While ING’s presence in the global capital markets is not likely to be as strong as it was prior to the crisis, the bank is focusing mainly on Benelux ventures and also on its own needs, namely investment banking and trading as a support to its corporate banking activities,” he added. “That is a smart strategy.”
Rabobank’s regional focus is nothing new. The only bank that didn’t receive any government guaranteed funding and has continued to maintain a triple-A rating, it has long made a niche of the Dutch corporate space, lending and underwriting for small and medium-sized entities and large multinationals.
“We have always been dedicated to the Benelux, and outside the region we have been focused on particular client segments like the food and agri sector,” said Arjo Blok, head of global financial markets at Rabobank in Utrecht. “Our strategy is not to cover all clients. We want to stay close to our clients and understand them well in good and in more challenging times.”
Last year Rabobank pooled its bond, loan and securitisation capabilities into a single DCM business to offer clients a more efficient, complete financing solution, Blok said.
According to Alexander Plenk, senior credit analyst who covers Benelux banks for UniCredit Group in Munich, both retail and corporate clients in the Benelux are among the strongest in Europe. The residential mortgage finance and real estate markets are strong. Despite the fallout from the demise of structured finance, the region’s banks have benefited from this through the crisis, a trend that will continue, he said – though a deepening recession in Europe would hurt all European banks. As strong Benelux corporates are, many depend upon overseas sales and revenues.
ING, for one, believes client commitment will reap long-term rewards. “If a company is going through a difficult patch, institutional investors feel better if ING is supporting the client,” Connelly said. It has already displayed this commitment by supporting debt restructurings and providing equity for clients like Tom-Tom, Heyman and Wavin.
Plenk stressed the importance of maintaining an international presence. Many major Dutch companies are multinationals, so their banks must be equally global.
Otherwise, their attention will be on strengthening parts of the businesses that already enjoy a leading market share, to enhance overall competitiveness. ING, a global leader in insurance, will want to retain its edge here, Plenk said. Rabobank, historically the premier bank for the food and agricultural sector, will similarly maintain and reinforce this strength.
Banks like ING and Belgium’s KBC – which is not likely to be involved in any underwriting or lending activity, given the potential strength of the Fortis/BNP Paribas tie-up – have made significant investments in Central and Eastern Europe, and will continue to look east. “These were excellent strategic investments and will be good stories going forward,” a banking analyst said.