There has been a lot of talk about what is still called the “ABN Amro” diamond and jewelry division, which supplies about 30 to 40% of the industry’s financing. As has been reported, it has been up for to sale for some time, seemingly to no avail.
Chaim predicted yesterday the division will eventually find a suitable and stable home, as the government of Belgium, which just injected cash into parent Fortis, will likely insist on it. Still, one has to feel bad for the people there — they will now have three owners in one year. Not a great situation for the most important bank in our industry.
Meanwhile, all this turmoil in the banking sector does not bode well for the industry here in America, where financing to wholesalers is becoming tighter – and is likely to remain so. Banks are raising interest rates and losing patience with long receivables. Borrowing criteria will likely be toughened.
In addition, people are questioning whether one formerly active bank wants to stay in the industry. And it’s not clear if someone will take its place – some hoped Indian banks would come in to this market, but they haven’t, at least as of yet. (And one leading Indian bank is having a bit of a scare.)
Most American banks, with the exception of Chase, still shy away from the industry, as it has certain features that make it unattractive for lenders: It is considered non-transparent and vulnerable to money laundering by government agencies like FinCen. And many American banks have problems of their own these days.
So it looks like the jewelry bank sector is consolidating – much like the industry itself.
UPDATE: The latest on ABN Amro.