ALGEMENE BANK NEDERLAND N.V.

1824–1964

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Algemene Bank Nederland (ABN) has historically been Holland's most internationally oriented bank, as well as an important player in the Dutch domestic banking industry. Often considered a conservative organization in a conservative industry, ABN has at times struggled with its stodgy image. At other times its caution has served it well. Incorporated in 1964 as the result of a merger between two of the Big Four Dutch banks, The Twentsche Bank and the Nederlansche Handel-Maatshappij (Netherlands Trading Society), ABN traces its origins to the golden age of the Dutch Empire.

In 1824, King William I organized the Netherlands Trading Society to help finance commercial ventures in the Dutch colonies in Southeast Asia. The company began its operations from an office in Batavia (now Jakarta), Netherlands East Indies. In its early years it encouraged commercial trade between Holland and its colonies. Toward the middle of the 19th century, the Netherlands Trading Society became increasingly involved in agricultural financing. Dutch banks traditionally specialized either in agricultural or commercial banking, not both. For this reason the Netherlands Trading Society was unique through the end of the 19th century.

At the dawn of the 20th century, the Netherlands Trading Society began to expand by acquiring several small provincial banks in Holland. In 1916, in cooperation with a number of other Dutch banks, the society set up the Netherland Bank for Russian Trade, but the Russian Revolution, one year later, put and abrupt end to the venture.

Throughout World War I, growth was slow but steady. After the war, Amsterdam became the most important financial center on the European continent, keeping the bank's earnings strong through the 1920s. The stock market crash of 1929 and the global depression that followed shook the banking community worldwide, but the Netherlands Trading Society, broadly diversified throughout the Dutch Empire, was able to survive the crisis.

Toward the middle of the 19th century, the Netherlands Trading Society became increasingly involved in agricultural financing.

1861–1964

By 1939, Europe was at war again. In May 1940, Nazi troops marched into Holland. As Dutch industry was required to produce goods for the occupying forces and trade regulations were made to favor Germany overwhelmingly, it was estimated that the Nazis drained Dutch national wealth more than 10% a year.

As the Nazis wrought havoc on the Dutch economy at home, the Japanese disrupted activities in the Netherlands East Indies. In 1942, the invaders announced their plans to liquidate a number of British and Dutch bank branches in the territories they occupied, among them the Netherlands Trading Society. After the war Indonesian nationalists assumed power as the Japanese retreated. The Dutch government struggled to return the territories to their political and economic state before the war, and Dutch merchants and bankers returned alongside the government. But after a few years of fighting Indonesian nationalists, the Dutch pulled out. Dutch bank branches were nationalized by the new independent Indonesian government under President Sukarno.

The Netherlands Trading Society suffered considerably from the dismantling of the Dutch empire. Competition with banks from other nations became fierce in areas it had dominated before. Although the bank grew both domestically and internationally throughout the 1950s and early 1960s, it found its influence overshadowed by larger foreign banks. In an effort to remain competitive, it merged with the Twentsche Bank in 1964.

The Twentsche Bank had a more domestic orientation than the Netherlands Trading Society. Established in 1861, the bank at first concentrated on financing exports from Twente, a cotton-producing region in Holland, to the Netherlands East Indies. The bank was prosperous in this enterprise and other export financing for the first 40 years of its operation.Encouraged by its success, it acquired a number of smaller banks in the Netherlands. The Twentsche Bank grew steadily throughout the first two decades of the 20th century. The bank faced hard times during the Depression, but it pulled through because of its cautious policies. During World War II, the bank's domestic network carried on its business under the severe economic disruption Holland suffered during German occupation.

Like the Netherlands Trading Society, the Twentsche Bank grew after the War, but not fast enough to keep up with world economic growth. The bank sometimes had to pool resources with other banks to meet the needs of its largest customers. The appearance of large foreign banks in Holland made the Twentsche Bank uneasy. In 1964, it agreed to join together with the Netherlands Trading Society. On October 3, the two banks merged under the name Algemene Bank Nederland N.V. (it is interesting to note that the other two of the Dutch "big four" banks, the Amsterdam Bank and the Rotterdam Bank, announced their own merger one week later; the Amsterdam-Rotterdam Bank (Amro) remains ABN's chief rival today.

1968–1988

The Algemene Bank Nederland was better equipped to deal with the heavy competition in the Dutch banking market. ABN began to grow almost immediately. In 1968, the bank acquired the Hollandsche Bank-Unie giving it a strong footing in Latin America and making it the largest bank in Holland. Four years later the bank acquired the Antillaase Bank-Unie N.V. in the Netherlands Antilles. Assets and earnings continued to grow steadily in the 1970s, although more slowly than competitors': in the early 1970s, Amro passed ABN to become the largest Dutch bank. But in 1975, ABN once again became the largest when it purchased the bank Mees & Hope, Holland's biggest merchant bank.

Throughout the 1970s, ABN showed a consistent preference for operating independently of other banks. As more and more European banks financed specific projects jointly, Algemene Bank Nederland kept to itself. ABN is a member of the Associated Banks of Europe Corporation (ABECOR), but unlike other banking consortiums, particularly the European Banks' International Company, ABECOR is not a particularly tight affiliation and ABN has only participated in some projects.

In 1979, ABN purchased the LaSalle National Bank in Chicago, giving it a stronghold in the United States. Throughout the 1980s, with domestic competition as fierce as ever, ABN has looked overseas for growth opportunities. In 1981, the bank opened a representative office in New York to promote capital market activities in North America.

ABN experienced steady but slow growth during the early 1980s. The bank's cautious managing board resisted inevitable changes: ABN was slow to install electronic banking systems on a bankwide level. Although slightly ahead of other Dutch banks, it lagged behind the international trend in the use of automated-teller machines. ABN was also sluggish in responding to the growing use of credit cards.

In 1986, the Dutch government deregulated the Dutch capital markets. Dutch banks were able to add floating-rate notes, certificates of deposit, bullet bonds, and commercial paper to their capital investment arsenal. In 1988, medium-term notes and zero coupons were allowed. ABN tried to be aggressive in these markets, but Dutch investors were hesitant to take advantage of the new and unfamiliar investment instruments, although the response was better from abroad.

1987–1992

ABN's caution was an asset in 1987 when Brazil declared indefinite suspension of interest payments on its loans from international banks. This action, combined with political instability in other Third World countries, forced many banks to increase their loan-loss provisions substantially. Many banks showed large net losses during 1987 as a result. ABN, however because of its low exposure to Third World debt, was not significantly affected by the crisis.

In 1992, the European Common Market countries will remove their trade boundaries, creating one integrated European market. European banks will have to adjust accordingly. The bank's international network, like its loan portfolio, is well diversified. The bank is represented in all the Common-Market countries except Portugal, something which should help if the integration of markets proves more unsettling then ABN expects. Meanwhile, Algemene Bank Nederland's management stresses its plan to continue growth from within on an independent basis.