ABN Amro’s private banking operations are a key asset for parties considering a takeover of the bank, even though the division’s financial results are generally weaker than those of its competitors.
Rumors of a potential takeover of ABN Amro are being taken very seriously by analysts and other market watchers. Bloomberg reported at the end of September that KBC was exploring options to acquire the Dutch bank. The Belgian bank-insurer denied the report immediately, but the cat was out of the bag. A common theory: the report was a trial balloon, floated by another European bank that does have concrete plans for ABN Amro.
The idea of a merger with KBC is considered “illogical” by many. KBC is viewed as “a typical retail bank,” while ABN Amro is seen more as a corporate bank with a strong private banking arm. The two would complement each other rather than create natural scale advantages.
For Johann Scholtz, equity analyst at Morningstar, that is not necessarily a reason to dismiss the idea. “Diversification would be an important motive for the acquiring party. Retail banks mainly rely on interest income, while private banking is largely fee-driven. Fees are less sensitive to the business cycle,” he explained.
Virtually all large European banks have now elevated diversification into a strategic priority. A recent example is ING’s move earlier this year to increase its stake in Van Lanschot Kempen to around 20 percent. In May, Belfius acquired a 33 percent stake in asset manager Candriam.
Lower capital requirements
Private banking, and by extension asset management, has become a major factor in the consolidation wave sweeping the European banking sector. That is partly because it generates a different type of income, but also because it generates higher income.
“Private banking is generally more profitable than retail banking,” said Scholtz. The main reason: the lower capital requirements tied to private banking. The products offered in that segment are typically less risky than in retail. For instance, the risk weight of a mortgage loan is usually 35 percent, while for a loan secured by a stock portfolio it is often 20 percent. According to Scholtz, “The return on equity of private banks is therefore generally higher than that of retail banks.”
But it is not all rosy: because private banking is relationship-driven, the costs are higher. In the first half of 2025, the cost/income ratio of ABN Amro’s private banking division was 75 percent, compared with 61 percent for retail and 52 percent for corporate, according to Morningstar’s Scholtz.
That 75 percent is also high compared with competitors. Scholtz noted: “A pure play private bank such as Julius Baer has a cost/income ratio of around 70 percent and is targeting 65 percent. UBS is currently at 67 percent for its private banking operations in Switzerland and EMEA.”
Achilles’ heel?
Are those high costs ABN Amro’s Achilles’ heel? After all, they mean the return on equity of private banking at the bank is not higher than retail banking’s (13 percent versus 22 percent in the first six months of this year).
Scholtz believes the issue is manageable. “All in all, ABN Amro’s private banking activities are more of a trump card for potential buyers than a deterrent. A bank that is already strong in private banking would pursue the scale benefits and certainly take on the challenge of reducing ABN Amro’s high costs.”
In an international context, private banking is also easier to scale across borders, Scholtz added. “Private banking is easier to scale cross-border than retail banking. Retail products are more often subject to country-specific rules. For example, there are significant differences between a French mortgage and a Dutch mortgage. But the rules for investment solutions are more often European in nature and fit well with clients who have assets in multiple countries.”
High flyers
Does this make KBC a “logical” buyer after all? Among Dutch market observers, the name that comes up more often is BNP Paribas, one of Europe’s five largest listed banks. ABN Amro’s CEO Marguerite Bérard served as an executive there in recent years, and in 2022 the French had already asked the Dutch Ministry of Finance whether an acquisition of the bank was possible. But investors are not enthusiastic about BNP Paribas’ strength. With a price/earnings ratio of barely 8, the bank appears to have limited takeover capacity.
The picture is different for high flyers such as UBS and Unicredit, both of which have a P/E ratio above 20. The European median is currently around 10, which is also where ABN Amro itself sits. Finland’s Nordea and Italy’s Intesa Sanpaolo—Italy’s second-largest bank after Unicredit—are at the same level, and both rank among Europe’s top 10 banks by size. Intesa, with its subsidiary Fideuram, is the Italian market leader in private banking and has previously shown interest in Belgian financial institutions. Nordea also has a “history” with ABN Amro: in 2016 there were talks about a possible merger.
‘Notoriously bad’
Any interest from Unicredit would be at least intriguing from a historical perspective. Since 2021, the bank has been led by Andrea Orcel. Back in 2007, Orcel was a dealmaker at Merrill Lynch and closely involved in the bid by Fortis, RBS, and Santander for ABN Amro. The trio acquired ABN Amro for 72 billion euro and split it up, but after the outbreak of the Global Financial Crisis the deal proved too big for Fortis and RBS: both banks had to be nationalized. In a 2015 interview with Orcel, the Financial Times described the 2007 transaction as “one of the most notoriously bad deals in recent memory.”