So I spent some of the day talking with bankers about what they think the ABN Amro-Barclays thing — which looks like a go — will mean …
Now, keep in mind this is just speculation from people who are ABN’s competitors and don’t necessarily have an inside track, but there seems to be some agreement that whatever happens, it won’t happen right away. The merger still has to be approved, and there can always be snags along the way. And even if it does goes through, these things take their time to work their way through the system. Most don’t see a real impact for another two years or so. (I haven’t heard from anyone at ABN yet, though one assumes they probably don’t know at this point either.)
No one denies this could be a huge deal — ABN accounts for, by one estimate, about a quarter of the industry’s credit. And many think that, with new owners, credit will tighten up — and to some extent that’s beginning to happen already, especially in the wake of the Fabrikant and LID Ltd. chapter 11 filings. (Though one banker raised an interesting point, that the two companies’ filings should not necessarily be conflated: The Fabrikant situation, this person argued, showed real underlying weakness in this industry — while LID was a dispute between the company and its lenders.)
As to what Barclay’s will decide to do with ABN’s jewelry portfolio, there is considerable disagreement here. Diamond and jewelry are a small percentage of the bank’s business, and, with this merger, it is about to get even smaller. It is also considered risky — especially lately — and comes with its own unique challenges, such as AML/Patriot Act compliance and all the rest of it.
Might Barclay’s decide it’s not worth it, and either jettison or sell off that business? Some seem to think so. But I spoke to one banking source who said it’s possible they may try to increase their diamond and jewelry portfolio. “If it’s not possible they will increase their business,” this person asked, “what are we doing in it?”
Interesting point. We’ll be watching this. Meanwhile, hope to see some of you in Denver.