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Good
morning everyone and thank you Rijkman for your introduction.
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This
is a ground breaking transaction:
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This
is the biggest merger ever in global financial services
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And
the biggest cross border deal
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Firstly,
I know not all of you will have had time to study our announcement
in
detail, so let me take a moment to run through the key
points:
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Barclays
is making an agreed merger offer to ABN AMRO
shareholders
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The
offer will be all shares
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The
terms are [3.225] Barclays shares for one ABN AMRO
share
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This
is valued at €36.2. that is equivalent on to ABN AMRO’s closing price on
Friday night
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The
offer values ABN at [Exxbn]
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The
offer represents a premium of [17%] to ABN AMRO’s price on 16 March, the
day prior to the announcement that Barclays and ABN were in exclusive
talks,
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And
is intended to offer a good deal to ABN AMRO shareholders
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The
transaction will be accretive in cash earnings per share, and
substantially economic profit accretive, to Barclays shareholders
by
2010
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The
combined group will have a UK corporate governance structure with
a
unitary board chaired by Arthur Martinez, who is currently chairman
of ABN
AMRO’s supervisory board
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I
will be chief executive, and Bob Diamond will be
President
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The
new board will consist of 10 members from Barclays and 9 from ABN
AMRO
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Three
members of the ABN Managing Board - Huibert Boumeester, Piero Overmars
and
Ron Teerlink –
will join
the Executive Committee of the enlarged
group
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Wilco
Jiskoot will become a Vice-Chairman of Barclays
Capital
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The
UK Financial Services Authority and the Dutch regulator, De Nederlandsche
Bank have agreed that the lead regulator will be the FSA, but the
FSA and
the DNB will both have key responsibilities in regulating the combined
group
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The
head office will be in Amsterdam
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We
estimate the combination will lead to annual pre-tax synergies
of €3.5bn
by 2010
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These
will split 80% cost and 20% revenue
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The
cost synergies will be achieved substantially in two
areas:
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In
Global Retail and Commercial Banking through rationalisation of
technology
infrastructure
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And
in Investment Banking and Investment Management, where the combination
capabilities and distribution provides big opportunities for
growth
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As
announced today, Bank of America has agreed to acquire LaSalle
for
$21bn.
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Notwithstanding
this sale, the enlarged group has significant exposure to the US
which we
will seek to grow over time
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By
ABN AMRO selling LaSalle at a very good price we expect to be able
to
return a substantial amount of capital to our shareholders - we
expect
this to be €12bn
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We
expect the LaSalle sale to complete in the fourth quarter of this
year.
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I
have been seeking to increase the rate of growth in Barclays by
diversifying our profit base
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The
aim of that is to ensure that our portfolio of businesses is well
aligned
with the massive growth opportunities in the global financial services
industry that I expect to occur over the course of the next
years
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The
combination of ABN AMRO and Barclays creates a uniquely advantageous
alignment with growth in the global industry in terms of geographical
footprint and business line mix
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This
merger fits perfectly into the strategic ambition of both Barclays
and ABN
AMRO
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The
objective here is not size
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What
customers want is not size, but capability (because they have
choice)
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What
shareholders want is not size, but
growth
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This
transaction moves us sharply forward in both
dimensions:
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In
investment banking, we expect the rate of growth over the coming
years to
be twice as fast as the growth of global GDP. The merger puts us
in the
top tier across all areas -
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Number
one in institutional money management
worldwide
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Top
five in investment banking - ahead of UBS, JP Morgan and Merrill
Lynch
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Top
ten in wealth management
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And
for our Global Retail and Commercial Banking the merger provides
a
complementary footprint: access to high growth markets like Brazil,
India,
Indonesia, and China combined with substantial market positions
in the
Netherlands, the UK Italy, Spain and
Portugal.
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We
will be well positioned to harness trade flows in a globalising
business
environment
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We
will have world class capability in growth areas such as affluent
banking,
credit cards, global payments and cash management, commercial banking
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payments
and cash management, commercial banking
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Our
reach to customers will be significantly extended by the size
of our
combined branch and electronic distribution
channels
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The
process of arriving at the synergies, which are very substantial,
has been
a joint one lasting over a month
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Business
leaders in both organisations have identified 10 broad areas of
synergy
opportunity.
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They
have drilled down in considerable detail using cost information
and
revenue data from both organisations.
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We’ve
also carried out a top down review of what’s reasonable by reference to
previous transactions and by benchmarking to top quartile cost
income
ratios
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All
of the cost synergies have been externally reviewed by PWC.
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We
are confident in delivering:
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The
€2.8 billion of cost synergies, represent 8% of the combined cost
base.
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While
the €0.7 billion of net revenue synergies, represent 0.3% of the combined
revenue base.
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The
implementation costs of €3.6 billion represent 112% of our gross cost
synergies
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...And
the impact of these synergies brings the cost income ratio of the
combined
organisation below that of either
institution
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...And
will enable us to achieve top quartile cost income performance
across all
businesses by 2010.
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The
appeal of this transaction is the substantial growth opportunity
it
presents.
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Over
time we expect that the merger will translate into more opportunities
for
staff.
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Our
ambition is to be a magnet for talent. We want to employ the best
people
in the industry and we think that some of the best people already
work for
ABN AMRO and Barclays
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However,
at this stage we expect iHowve
an overall reduction in headcount of the combined entity of
10%,
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It
is broadly the same number as the normal annual turnover in the
employee
base.
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The
Transaction is value generating for both sets of shareholders
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the
return on investment to Barclays will be [13%] in
2010.
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This
compares to our cost of capital of 9.5%
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and
this compares with an expected rate of return in share buybacks
of between
11 and 12%.
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We
expect the transaction
to be 5% accretive for Barclays shareholders in 2010.
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And
the transaction will also become substantially Economic Profit
Positive in
2010.
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Our
overriding objective is to maintain a strong AA rating
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We’ll
continue to apply our value based metrics and to view the business
through
the lens of Economic Profit.
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Our
payout rate will be approximately
50%
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To
summarize: this is a great growth
opportunity
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The
merger of ABN AMRO and Barclays represents a unique and valuable
opportunity to accelerate the delivery of
strategy
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That
acceleration will greatly benefit customers and
shareholders
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Thank
you
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