Interview with the CEO

The year 2017 was a good one. Solid financial results, rising client satisfaction scores, appealing innovations, and appreciation for our sustainability initiatives in the Netherlands and beyond all reflected the bank's success. But there is still room for improvement, according to CEO Kees van Dijkhuizen.

Our agile way of working now facilitates the quick implementation of ideas. Our bank's enterprising, creative, and solution-oriented quality is something to be proud of. Kees van Dijkhuizen Chief Executive Officer

How do you look back on 2017?

“For ABN AMRO, 2017 was a good year. Our financial performance was strong, our clients appreciate us more than ever, costs were lower, and we're contributing to a more sustainable economy. We're well on track towards achieving our strategic goals for 2020. And our capital position is a solid starting point, especially now that we have more clarity on Basel IV. We have set a dividend pay-out target of 50% of sustainable profit from 2018 onwards.”

“At the same time, 2017 was a year of change. On balance, our headcount decreased by as much as 8% in 2017. That is a big deal. 2017 also saw changes in our management structure. We have a new slimmed down top structure with more focus on the business, and new managers have been appointed at many levels as part of the introduction of agile working and our switch from a regional orientation to a sector-based approach.”

What particular highlights are you proud of?

“I’m proud of us for achieving such strong performance despite the rapid changes. Profit totalled EUR 2.8 billion. And we are making progress on sustainability. We have recently entered the top 5% of the FTSE4Good Index and the top 5% of the Dow Jones Sustainability Index. Early in 2018 at the World Economic Forum in Davos, we won the Circular Economy Investor Award. We're really carving out a reputation as a large bank committed to sustainability. Last but not least, our smart innovations in 2017 are worth mentioning.”

What could have gone better in 2017?

“Employee engagement has decreased by three percent, which is not good for us nor for our clients. We will be doing everything in our power to improve engagement again. Employees feel the bank's strategy and profile are not clear enough. We’re also talking to the Employee Council to get a crystal clear picture of what needs to be done.”

What sets ABN AMRO apart from other banks?

“When we ask for feedback and opinions, a commonly heard answer is that we are experts at what we do. We want to further develop that expertise. After all, no matter the degree of digitalisation, the expertise of our employees is at the forefront. We are a solid Dutch bank with a focus on growth in Northwest Europe. And we are active in a number of niche markets, such as the funding of energy, commodities and transportation as well as clearing. And, another major area in which we stand out is our commitment to innovation and sustainability.”

Sustainability seems to be particularly important to you personally, why is that?

“Ever since the 2015 Paris Climate Agreement, everybody should be well aware that we need to take action on climate change. For me personally, that moment came a long time ago, back in the early seventies. I was in secondary school when I read the book The Limits to Growth by the Club of Rome. Then in 1989 I contributed to the creation of the first National Environmental Policy Plan at the Dutch Ministry of Economic Affairs. Don't get me wrong, I wouldn't say sustainability has been at the core of my career, but it's definitely a topic that has been close to my heart for a long time.”

What has the response been internally when it comes to sustainability?

“Looking at the sustainability initiatives that the bank's employees themselves are launching, it's clear that sustainability is on everybody’s mind. We aspire to upgrade the buildings and homes in our real estate portfolio from an average energy label D to an average energy label A by 2030. That ambition started in Commercial Real Estate, and we expanded this to our mortgage portfolio. Our client loan portfolio is where we can make a difference, as as a substantial portion of our loan book is related to real estate. Our agile way of working now facilitates the quick implementation of ideas like that. Our bank's enterprising, creative, and solution-oriented quality is something to be proud of. I live in an old house myself, about a hundred years old, and I've made it greener by having the floors insulated, getting doubleglazing, installing new boilers, electric power from wind energy, and so forth.”

Can you expand on the bank’s innovations?

“For instance Tikkie, also a bottom-up initiative by the way, is a huge success, used by two million people. And our own FinTech start-ups – New10 – where clients can arrange a business loan within fifteen minutes – and Prospery – our online wealth manager. And then there’s Franx - for SME clients who do international business. We launched Franx early in 2018, but most of the work in setting it up was done in 2017, of course.”

“What’s new is that, in creating innovative concepts, we work more and more closely with FinTech start-ups. In many areas, FinTechs can innovate faster and better than we can, but we are the party with the infrastructure, the financial expertise and the clients. We complement and reinforce each other. Collaborations like this, also via platforms, are the future. To facilitate this, we’ve established the Digital Impact Fund in which we invest in FinTechs that have a good strategic fit with us. With Tink, for instance, and with Cloud Lending Solutions. In 2018 we’ll be starting more of these collaborations. This is a faster way of bringing solutions to clients than trying to invent everything in-house.”

In June 2017, ABN AMRO ranked first in a Vlerick Business School digitalisation survey, Transformers 200. ABN AMRO is the Netherlands’ front runner when it comes to digital transformation. What exactly is the bank doing right?

“The survey gives us high performance scores in all six areas covered, from technology to culture and talent development. For example, we have made good progress in migrating our applications to the cloud, which is going to pay off in the form of lower costs and more efficient innovation. Which is going to pay off in the form of lower costs and more efficient innovation. And we’re ahead of the pack in implementing agile working methods. The way the businesses cooperate with IT at ABN AMRO is lightyears away from what it was a few years ago. They team up to make choices and prioritise issues. It works incredibly well, and promises to work better and better in 2018. It gives an amazing boost to product innovation, too.”

What does ABN AMRO want to achieve in the years ahead?

“IT giants like Google, Amazon and Apple are likely to play a bigger role in the financial ecosystem. It’s still unclear where things are heading, and what the impact will be. Are they going to try to take over our role? In this context, too, our added value in terms of financial and sector expertise is what can really give us an edge in addition to the data of the vast client base we serve. I hope we will end up complementing each other, as is now the case with FinTechs. Banking is a highly regulated line of business, and because of that it’s doubtful whether large IT companies are really keen to jump in themselves. If over the next five to ten years we manage to overcome this challenge, and even to grow profitably and become stronger, we’ve done well. The bank is in good shape right now, so we have every confidence we’ll succeed.”

What kind of year is 2018 going to be?

“Our prospects for 2018 look encouraging. The economy is in full swing, that is good and that is to our clients’ benefit. They have started investing after a long period of ‘wait and see’. The bank is flourishing and client satisfaction is climbing. It also depends on the action the European Central Bank will take on interest rates. The current low rates are a problem for every bank. In 2017 we paid 0.4% interest over tens of billions of euros that we deposited with the ECB.”

Confidence has remained low since the financial crisis and is just starting to edge back up. What is ABN AMRO doing to bolster confidence?

“We’re consistently putting clients’ interests centre stage, in a variety of ways. To give you a recent example, clients are tired of earning so little interest on their savings due to the ECB’s monetary policy. We understand their frustration and proactively offer advice, for instance by suggesting they use their savings to pay off their mortgages.” 

“Another way we try to bolster confidence is by demonstrating our social responsibility with all kinds of sustainable initiatives, and by investing in six social impact bonds, for instance. These bonds have been designed to address social problems, like reintegrating cancer survivors into the workforce. Building confidence is hard work.”

What was the most difficult dilemma ABN AMRO faced in 2017?

“Digitalisation and changing client behaviour is moving far faster than we reckoned, and this has a big impact on staff in our branches. More and more, the tables are turning: these days we’re increasingly bringing the branch office to the client’s home. This inevitably means staff reductions, and we fully understand the uncertainty this creates. At ABN AMRO, we invest in the employability of our people. Still, letting staff go, is something we find difficult.”

The Employee Council wants the bank to invest more in retraining and updating employees whose jobs are on the line. Is ABN AMRO doing enough in this respect?

“Wherever we can, we try to retrain employees for new roles. We’re encouraging employees to use training opportunities to stay as employable as possible, inside and outside the bank. The training budgets are already there. If we foresee that a certain role will disappear within a few years, we will nudge employees proactively to learn new skills, even if these skills are not immediately relevant to their current jobs. This is something we’re going to put in place in 2018.”