The cost-cutting campaign at ABN Amro is to go a stage further, with another 2,850 jobs to go across the Group, yielding estimated savings of Euros 770 million a year from 2007. There will be one-off charges of Euros 790 million in 2004.
ABN AMRO says it began informing staff of affected business units today about a number of decisions. “These decisions accelerate and broaden the Group Shared Services (GSS) action tracks announced in August 2004 and refine the bank’s Wholesale Clients SBU (WCS),” says a spokesman for the Dutch bank. “While it is too early to provide specific details of some of these changes it is possible to quantify the overall impact.”
The total costs regarding the GSS action tracks will be Euros 870 million, of which Euros 515 million will be covered by the one-off charge. The remaining costs of Euros 355 million will run through the P&L in 2005-2007. The total costs of the GSS initiatives are Euros 146 million more than indicated in the presentation following the publication of the half year results 2004. The increase is due to activities relating to the real estate programme. This will lead to additional savings in 2005 and 2006. The impact on the 2005 P&L will be positive instead of slightly negative as earlier announced.
The expected cost savings related to the GSS action tracks will increase from the earlier announced Euros 500 million to at least Euros 600 million per year as of 2007. The expected cost savings related to the WCS refinement amount to EUR 170 million per year as of 2007.
The outlook for full year 2004 net profit to be at least 10% higher than the previous year (excluding the net profit on the sale of Bank of Asia and LeasePlan Corporation, and excluding the charges related to GSS and WCS), remains unchanged.
GSS initiatives accelerated for IT and HR and broadened for real estate GSS was established in 2004 to create value across the Group through increased client satisfaction, higher operational efficiency, optimizing of operational risk and increased flexibility. It focuses on realizing synergies across the Group through further consolidation and standardization.
Regarding Information Technology (IT), GSS has analysed alternative delivery and sourcing scenarios: in-house consolidation, partial outsourcing, multi-vendor strategies and/or off shoring. This analysis shows that, for each scenario, this process will lead to a staff reduction over the next 18 months of approximately 1,200 FTEs out of a total of 5,000 FTEs working across the Group. Given the size of the operations of the bank in the Netherlands and the US, IT staff in these countries will be relatively more affected compared with those in other countries. Depending on the extent to which we choose outsourcing as a solution for certain activities, we anticipate that an additional number of staff will be transferred to other employers in the future.
For Human Resources (HR) a transformation programme was defined, aimed at improving the quality and efficiency of the HR service. Standardization of processes and structures, together with modifications in the supporting technology, will lead to a staff reduction over the next two years of 550 FTEs worldwide across all BUs. Approximately half of the impacted HR staff is located in the Netherlands, approximately a quarter in North America and the remainder in the rest of the world.
A global real estate program has been developed to optimise the bank’s global property portfolio. This initially focused on improving space efficiencies and has in recent months been broadened to include a more effective programme for managing surplus space. As a result the total costs for the GSS initiative have been increased by EUR 146 million, with cost savings being realised from 2005.
In October of this year, WCS implemented a number of changes to simplify the organisation and focus on opportunities for growing wholesale banking revenues through the development of new products and cross product synergies.
The changes, aimed at allowing bankers more time to focus on clients and less time on administrative tasks, saw WCS move from operating through seven business units to three business units: Global Markets, Global Clients and WCS Services.
A number of staff changes are being made to reflect this refinement. It will lead to a staff reduction of approximately 1,350 FTEs across all three BUs. Approximately 250 new FTEs will be employed during the same time to reflect the new business profile. Therefore, the overall number of FTEs in WCS will be reduced by 1,100.
The reductions will be concentrated in Europe, Middle East and Africa (EMEA), where 73% of the roles affected reside. Within EMEA, the changes are concentrated in the Netherlands, with 28% of the total, and the United Kingdom, with 22% of the total. The remaining 23% of changes will take place in over 24 EMEA countries.
Outside EMEA, 8% of the total is in the US, with another 6% across seven other countries in the Americas. Changes in the Asia Pacific region will account for 13% of changes and will be spread across 15 countries.
Employee representative bodies have been informed and will be consulted on the above plans. All necessary consent will be received before proceeding with the implementation of any plans.