The prolonged restructuring at ABN AMRO took another turn this week with news that the Dutch bank has sold the ABN AMRO Mortgage Group, Inc., its US-based Residential Mortgage Broker Origination platform and servicing business – which includes AAMG, InterFirst and Mortgage.com – to Citigroup.
Citigroup will purchase approximately US$9 billion in net assets, of which approximately US$3billion is ABN AMRO Mortgage Group’s mortgage servicing rights associated with its US$ 224 billion mortgage servicing portfolio. After accounting for costs related to the transaction, ABN AMRO expects to record a small book gain on this transaction.
LaSalle Bank Corporation, ABN AMRO Mortgage Group’s corporate parent, will remain in the residential mortgage business. Consumer mortgages and home equity loans will continue to be core products delivered by LaSalle Bank through its extensive retail branch network in Illinois, Indiana and Michigan.
ABN AMRO says its decision to sell the business is part of a “strategy to streamline its activities and to align them around its mid-market commercial and consumer clients. ABN AMRO Mortgage Group’s business, which is primarily focused on a US-wide national mortgage broker network and mortgage servicing portfolio, falls outside of the bank’s strategy.”
“The mortgage company’s performance over the last 18 months has been impressive,” says Joost Kuiper, Member of ABN AMRO’s Managing Board and responsible for the Business Unit North America (BU NA). “In a declining market, ABN AMRO Mortgage Group realised increased revenues and profits, reduced its cost base, introduced products that positioned the company for sustainable growth and, most recently, has driven improved market share. It is this very turnaround that allowed Citigroup to see the value of the business. For us, the decision to sell was one that was appropriate to make in light of our strategic focus on the mid-market client segment.”
Although the decision has been made to exit this business, ABNAMRO says it continues to have a strong presence in the US. The BU NA brings together ABNAMRO and LaSalle Bank Corporation’s client activities in the US and Canada, forming one of the largest foreign-owned financial holding companies in North America with total assets of approximately USD217billion. LaSalle Bank Corporation is the largest bank holding company headquartered in Chicago with USD 122.3 billion in assets. The BU NA remains a significant contributor to the Group’s revenues and its business is largely focused on ABNAMRO’s mid-market client segment.
Closing is expected towards the end of first quarter 2007.
The risk weighted assets for ABNAMRO Mortgage Group to be released as the result of this transaction amount to USD 8 billion.
Lehman Brothers is assisting ABNAMRO as financial adviser on the divestment.