Wholesale Clients Technology, Operations and Property Services (TOPS) Update Keith Edginton

Wholesale Clients

Technology, Operations and Property Services (TOPS) Update

Keith Edginton

London, 25th June 2001

2

Agenda

Context

TOPS Target Operating Model

TOPS Transition Plan

Progress to Date

Sourcing Strategy Update

3

TOPS Business ManagementMartin Smith

TOPS Human ResourcesBarbara Turner

TOPSCOO - Wholesale Clients

Keith Edginton

TOPS America

Michael Geslak

TOPS Europe

Ron Teerlink

IT Strategy, Projects &

DevelopmentMike Hampson

Operations

William Higgins

TOPS Asia Pacific

Bob Davis

Technology Operations & InfrastructureWaleed Hanafi

Technology

Keith Edginton ai.

Property

Martin Smith a.i.

TOPS has a strong, committed management team focused on delivering the transition as quickly as possible

Context

4

The management team has a wealth of experience and functional expertise

Role Responsibilities BackgroundWho

• Wholesale Clients COO• Global Head of TOPS• Global Head of

Technology a.i.

• Deliver Wholesale Clients cost savings• Transform TOPS into a commercial

proposition• Maintain business as usual while mitigating

operational risk

• Global Investment Bank COO• UBS - CIO Europe

Keith Edginton

• Global Head of IT Strategy, Projects and Development

• Project rationalisation• Strategic asset divestment• Overall responsibility for TOPS-wide Transition

• Head of UK PMU• Head of UK Equity IT • Morgan Stanley• CSFB

Mike Hampson

• Global Head of Technology Operations and Infrastructure

• Infrastructure rationalisation and efficiencies• Technology support

• Asia Pacific CIO• Visa International - Network

Services

Waleed Hanafi

• Global Head of TOPS Business Management

• Global Head of Property a.i.

• TOPS MIS, Operational Risk Management and Audit control

• TOPS Financial Control• Optimise property portfolio

• London COO• Head of UK Finance

Martin Smith

• Global Head of TOPS HR • HR advisory services for TOPS staff and mgt• Key individual policy

• Head of UK Central Services HR

• UBS - Global HR

Barbara Turner

• Global Head of Operations

• Establish global organisation• Deliver regional hub processing• Reduce cost per trade

• Head of UK Operations• UBS - Europe Operations

William Higgins

Context

5

The structure is strengthened by the implementation of a regional matrix and a number of significant recent hires….

Role Responsibilities BackgroundWho

• Regional Head of TOPS Asia Pacific

• Deliver transition from regional to functional structure

• Maintain oversight, control and co-ordination for region

• COO Asia Pacific Regional Office• Bank of America - Asia Pac

Strategy and Planning

Bob Davis

• Regional Head of TOPS Americas



• COO North America Treasury & FI• USA Regional Head of Risk Control

& Middle Office

Michael Geslak

• Regional Head of TOPS Europe



• Manage Workers Councils and Union interactions

• European Division - Head of Operations

• International Division Head of Organisation and Information

• COO Germany

Ron Teerlink

Context

• Global Head of Technology

• Define and Implement global IT strategy for Wholesale Clients

• ING Barings - Chief Information Officer

• Skandinaviska Enskilda Banken - Group Head of IT

Lars Gustavsson

• Global Head of Propery

• Optimise property portfolio• Deliver property transition savings

• Prudential - Head of Property EMEA

• Citibank - Head of Property Europe

Ray Carneiro

6

TOPS is the largest of the Wholesale Clients Business Units, with a presence in all major locations around the world

47 countries47 countries

Technology, Operations and Property ServicesTechnology, Operations and Property Services

Cost base €2.1bn+Cost base €2.1bn+

8000+ people8000+ people

Context

7

1

2

3

In line with the Strategic Review ABN AMRO has prioritised 3 areas to maximise economic profit

Double revenues

Reduce operating costs• Simplify and rationalise IT • Restructure operations into hubs • Consolidate buying • Streamline support functions

Maintain risk capital & reallocate toward priorities

Context

8

Within this prioritised framework, TOPS will initially focus on Operating Cost Reduction while preparing the ground for revenue generation

1

2

3

Double revenues

Reduce operating costs• Simplify and rationalise IT • Restructure operations into hubs • Consolidate buying • Streamline support functions

Maintain risk capital & reallocate toward priorities

Context

9

Agenda

Context



Progress to Date


10

TOPS’ strategic goals are focused on reducing cost, establishing a service culture and pursuing revenue opportunities, while continuing to mitigate operational risk

Technology, Operations & Property

WCS

C&CC

CorporateCentre

PC&AM

?

?

ExternalProviders

InternalStaff

?

?

Short term

Long term

Cost Reduction

• Deliver annualised savings across TOPS of €432m by 2002

• Create cost transparency and accountability

Cost Reduction

• Deliver annualised savings across TOPS of €432m by 2002

• Create cost transparency and accountability

Attain/Maintain Control

•Manage and deliver change effectively•Agree service levels•Efficient and responsive

Attain/Maintain Control

•Manage and deliver change effectively•Agree service levels•Efficient and responsive

Commercialisation

•Create performance culture•Pursue revenue opportunities

Commercialisation

•Create performance culture•Pursue revenue opportunities

- TOPS Operating Strategy -


11

Europe HubEurope Hub

Americas HubAmericas Hub

Americas Securities

GTS PaymentsFX/MM

Americas Securities

GTS PaymentsFX/MM

European Securities

GTS PaymentsFX/MM

European Securities

GTS PaymentsFX/MM

Local Ops GroupLocal Ops Group


Asia Pacific HubAsia Pacific Hub

Asia Pacific Securities

GTS PaymentsFX/MM

Asia Pacific Securities

GTS PaymentsFX/MM


IT infrastructureIT infrastructure



Global Functional Hub

MISStatic DataOperations ControlStrategyManagementService Management

Global Hub

OTC Derivatives

ET Derivatives

IT Strategy, Projects & Development

The organisation structure is being simplified and rationalised, duplication removed and support service provision regionalised and globalised


12

Agenda

Context



Progress to Date


13

Control Initiatives

Rationalisation Initiatives

Vision / Transformation Initiatives

• Global Ops Control and Control MIS

• Global Reference Data

• Global Organisation

• Americas Securities Regionalisation

• European Securities Regionalisation

• AsPac Securities Regionalisation

• Global FX & MM Hub

• Global OTC Derivatives Factory

• Global ETD Clean-up

• Global Network and Supplier Mgt

• Global Operations Performance

Framework

“Attain and Maintain Control of the Organisation”

“Reduce Operating Costs”

“Enable Transformation”

- Current Transition Programme -

• Establish Organisation and Governance

• Establish Global Project Office

• Define Service Provision with IT Customers

• IT Asset control review

• Establish TOPS system infrastructure

• Consolidate AmLo IB Development

• Integrate DI, O&I and RIM

• Reduce Contractor Ratios

• Consolidate Asia Pacific Country IT

• Consolidate North American Development

• Rationalise Global Project Portfolio

• Platform Management and Consolidation

• Long term IT Operating Model

• WCSBU Technology Architecture Initiative

• Global Procurement

• TOPS Balance Sheet

Other / Programme Management

• Global Network Management

• Market Data Rationalisation

• Lotus Notes Architecture

• Country IT and Data Centre Consolidation

• Property Review

• Transition Management

Operations Technology



By the start of the year we had developed a detailed transition programme comprising 34 key control, rationalisation and transformation initiatives


14

Increase Savings Deliver Benefits Early

Single location (‘Hub and Spoke’)delivers maximum savings

Building on the best available infrastructure will deliver benefits in the shortest period

‘Green field’ site does not meet timing criteria, therefore need to consolidate into an existing location

The first wave of consolidation should focus on AmLo as this represents approximately 40% of the total TOPS global cost base

Since the launch of the transition programme we have been investigating a number of ways of increasing and accelerating the delivery of savings, the first of these was called ‘Project Magellan’

AmLo shows duplication in all areas: processes, services, IT infrastructure and projects


15

Choices have been made between Amsterdam and London, based on best ‘value for money’

London provides the best solution for AmLo securities processing

IT strategy, projects and development should be optimised across AmLo

Centralisation of securities processing

Rationalisation of IT Development and Project Offices

London provides the best solution forAmLo IT Infrastructure service provision

Centralisation of associated IT infrastructure

Amsterdam provides the best solution for a European Treasury processing hub

Centralisation of Treasury processing


16

The original transition programme, pre Project Magellan, identified €305m of annualised savings, given a restructuring cost of €506m


Restructuring CostAnnualised

Savings

Operations

Technology

Property & Procurement

Other

Total €506m € 305m

€192m

€150m

€94m

€70m

€138m

€108m

€59m

-

- High Level Cost Benefit Analysis -

FTE Savings

758

589

-

-

1347

17

We estimate that the total programme, including Project Magellan, will deliver €432m of annualised savings, given a restructuring cost of €630m


Restructuring CostAnnualised

Savings

Operations

Technology


Other

Total € 630m € 432m

€221m

€245m

€94m

€70m

€160m

€213m

€59m

-

- High Level Cost Benefit Analysis -

FTE Savings

879

1222

-

-

2101

Our total annualised savings would reduce the WCSBU efficiency ratio by approximately 6%

18

Operations

TOI

IT SP&D


Total P&L Savings€408m

20012001

€151m €482m

€161m

€99m

€114m

€108m

€143m

€92m

€110m

€63m

€19m

€12m

€87m

€33m

TOPS has committed to deliver €249m of annualised savings by the end of this year

20022002 20032003 20042004

€474m

€161m

€99m

€114m

€100m

€432m €249m €476m €474mTotal Annualised Savings

20002000

€30m

€0m

€0m

€30m

€0m

€0m

- Annualised Savings Target (TOPS) -


19

Agenda

Context



Progress to Date


20

Almost 30% of this year’s targeted annualised savings have been delivered so far and work is underway to deliver the remainder of the savings ‘pipeline’

Realised SavingsSavings in the ‘pipeline’Savings not yet in pipeline

€12m€12m

€13m€13m

€89m€89m

€165m€165m

Target P&L Savings €181m

Target Annualised Savings

€249m

€80m€80m €71m€71m

- Savings Delivered as at End of May -

The pipeline includes committed outflo

ws of 483 FTEs

from 01/06 as a result o

f Project M

agellan

Progress to Date

21

More detailed analysis shows that we are materially on track, with our restructuring costs less than planned and our savings realised to date slightly ahead of schedule

Progress to Date

Total 2001 Actual Target Variance€m €m €m €m €m

Restructure Costs 630 432 49 55 -6

Annualised Savings 432 249 71 67 4

Target May 2001

22

Agenda

Context



Progress to Date


23

TOPS will remain accountable for the levels of services provided to its customers, irrespective of where the services are sourced from

Target Service Delivery Model

LoB1 LoB2 LoB3 LoB4 LoB5 LoB6 LoBn

ServiceDelivery

Management

Srv1 Srv2 Srv3 Srv4 Srv5 Srv6 Srv7

“Client Demand for

services”

“Provision of services”

Service Level Agreements will be used to manage relationships with the business and service

providers


24

TOPS will remain accountable for the levels of services provided to its customers, irrespective of where the services are sourced from

Target Service Delivery Model

LoB1 LoB2 LoB3 LoB4 LoB5 LoB6 LoBn

ServiceDelivery

Management

Srv1 Srv2 Srv3 Srv4 Srv5 Srv6 Srv7

“Client Demand for

services”

“Provision of services”

In the target state, TOPS will focus on service delivery

management, and the provision of a limited number

of services

Increasingly look for support services to be outsourced

either internally or externallyService Level Agreements will be

used to manage relationships with the business and service

providers


25

A low level of annuity business combined with a largely fixed cost structure leaves Wholesale Clients particularly exposed to market volatility and margin erosion

- Current Structure - - Target Structure -

BULL MARKET

BEAR MARKET

PROFIT

LOSS

Total Cost

Revenue

Fixed Cost

Variable Cost

€

Fixed Cost

Variable Cost

PROFIT

Revenue

Total Cost

€

BULL MARKET

BEAR MARKET

COSTCOST• High, fixed cost base

• No protection from margin erosion

• Low, variable cost base

• Better protection from margin erosion

• Better utilisation of resources

VALUEVALUE• Unresponsive to market and competitive pressure

• Technology base is inflexible and unreliable

• Deliver more revenue for lower spend

• Capability to grow the business more quickly

CONTROLCONTROL• Cannot measure service delivery

• Lack of management bandwidth

• Agree and implement service levels

• Total cost transparency

• Retain control of key services

RISKRISK• Delivery is high risk for the bank • Delivery is low risk for others


26

The transformation from a fixed to variable cost base will begin with the divestment of businesses that are no longer relevant

Retain Assets

Divest Assets

Keep in-house

Re-source

TransformInternally

Mgt Contract

Joint Venture

Outsource

Divest assets which are no longer relevant

to the business

Divest assets which are no longer relevant

to the business

Identify and retain core strategic assets – the ‘family silver’

Identify and retain core strategic assets – the ‘family silver’

Decide on the best sourcing model for non-

core assets

Decide on the best sourcing model for non-

core assets

Need:Delivery capability

Need:Delivery capability

Need:A supplier

Need:A supplier

Need:A partner

Need:A partner

Need:A partner

Need:A partner

Need:Buyers

Need:Buyers

Portfolio of Assets

- Managing Technology Assets -


27

A sourcing strategy has been adopted that allows us to move to a variable cost structure while retaining ownership of those core skills and services that we do best

Outsource to

high value provider

Keep

Outsource to

high competence

provider

Keep and reengineer or partner

with outsourcer

Key:

= Services sourced inside TOPS

= Services sourced outside TOPS

- Potential Sourcing Model -

Current Capability Level

Competitive Advantage

Hig

hL

ow

Low High


28

- Capability & Competitive Advantage -

Current Capability Level

Competitive Advantage

Hig

hL

ow

Low High

SP&D Business Solutions

SP&D Business Solutions

SD&I LondonSD&I London

SD&I PakistanSD&I Pakistan

Development(AAITS)

Development(AAGITS)

ABN AMRO Infoserve

ABN AMRO Infoserve

ISAPISAP

Technology Development

Capability

VoiceVoice

eMaileMail

Network Services

Network Services

Customer Support

Customer Support

IT OperationsIT Operations

Technology Infrastructure

We have used the sourcing model to analyse capability and competitive advantage for Technology Infrastructure and Development Capability


29

The first tranche of the strategy concentrates on our Development Capability

- Development Capability-

Implement a new operating model for our Development Capability, which replaces the current fixed cost base with a variable cost service

Provides a reliable, scaleable service that provides flexibility both in terms of cost and skills

A variable cost service will be assessed by reviewing development using a new sourcing approach and new licensing agreements for products with a large cost base such as ISAP

StrategyStrategy

ApproachApproach

BenefitsBenefits

OpportunityOpportunityTransform an organisation of 1000 people who provide development services and systems maintenance to all Business Units in over 50 countries with a current cost base of approximately €140m

Note: Figures include SD&I London, Amsterdam, Pakistan and ISAP


30

The second tranche will run in parallel with the first, addressing the additional cost reduction and service improvement potential in our Technology Infrastructure

- Technology Infrastructure -

Further reduce cost, reduce operational risk and improve service quality through re-sourcing provision of services

A lower cost, reliable, scaleable service that provides greater flexibility

Infrastructure services will be assessed to determine the appropriate approach, which include the single / multi-vendor and fast track choices

StrategyStrategy

ApproachApproach

BenefitsBenefits

OpportunityOpportunityImprove the operational efficiency of our voice, eMail, network, customer support and IT operations services which represent over €330m of operation cost and approximately 1500 people


31

Perception of Not Getting the Best

Deal

No diversification of risk or skills (‘all our eggs in one basket’)

Perception that we have not got the best deal Does any one organisation have all the required

skills?

Perception of Not Getting the Best

Deal

No diversification of risk or skills (‘all our eggs in one basket’)

Perception that we have not got the best deal Does any one organisation have all the required

skills?

We are managing the vendor relationship issue, which is a choice between the multiple service provision approach versus the strategic partnering approach with a global entity

Greater Value to the Bank Ability to create innovative solutions, e.g. a

venture or alliance, which delivers more value at lower cost

More power over a single supplierBetter service quality worth more than low price alone Vendor more likely to be flexible to changes in our needs

Greater cost transparency and flexibility from the supplier

Greater Value to the Bank Ability to create innovative solutions, e.g. a

venture or alliance, which delivers more value at lower cost

More power over a single supplierBetter service quality worth more than low price alone Vendor more likely to be flexible to changes in our needs

Greater cost transparency and flexibility from the supplier

Play Vendors Off Against Each Other

Potential to ratchet down price through competition

Ability to appoint functional/regional ‘specialists’ Perception that ‘due process’ has been

completed

Play Vendors Off Against Each Other

Potential to ratchet down price through competition

Ability to appoint functional/regional ‘specialists’ Perception that ‘due process’ has been

completed

Potentially Poor Service - ‘False Economy’

Contractors will claw-back the discount, e.g. through contract inflexibility

‘Beauty Parades’ are slow and expensive – often negating the price reduction achieved

Cherry-picking by vendors (small contracts receive less attention from the vendor)

Smaller scope for innovation or flexibility

Potentially Poor Service - ‘False Economy’

Contractors will claw-back the discount, e.g. through contract inflexibility

‘Beauty Parades’ are slow and expensive – often negating the price reduction achieved

Cherry-picking by vendors (small contracts receive less attention from the vendor)

Smaller scope for innovation or flexibility

Benefits Disadvantages

Technology Partnership(Sole-source)

Multi-Vendor

- Sole-Sourcing versus Multi-Vendor -


32

We continue to consider ways of delivering even greater savings in a shorter time period, while at the same time minimising execution risk and increasing the certainty of delivery

Focusing on our core competencies while at the same time considering alternative sourcing approaches for those non critical tasks which we do not do well will enable us to deliver even greater value

Summary

TOPS are focused on establishing a ‘client first’ organisation and reducing cost through globalising and regionalising service provision

We have developed an aggressive transition programme that will deliver over €430m of annualised savings within the next 24 months

TOPS have already realised over €71m of annualised savings and our pipeline for the rest of the year indicates that we are track to deliver the remainder of the projected savings

Our activities this year will underpin the bulk of the savings scheduled to be delivered in 2002

33

Cautionary Statement regarding Forward-Looking Statements

This announcement contains forward-looking statements. Forward-looking statements arestatements that are not historical facts, including statements about our beliefs and expectations.Any statement in this announcement that expresses or implies our intentions, beliefs,expectations or predictions (and the assumptions underlying them) is a forward-lookingstatement. These statements are based on plans, estimates and projections, as they are currentlyavailable to the management of ABN AMRO. Forward-looking statements therefore speak only asof the date they are made, and we take no obligation to update publicly any of them in light ofnew information or future events.

Forward-looking statements involve inherent risks and uncertainties. A number of importantfactors could therefore cause actual future results to differ materially from those expressed orimplied in any forward-looking statement. Such factors include, without limitation, the conditions inthe financial markets in Europe, the United States, Brazil and elsewhere from which we derive asubstantial portion of our trading revenues; potential defaults of borrowers or tradingcounterparties; the implementation of our restructuring including the envisaged reduction inheadcount; the reliability of our risk management policies, procedures and methods; and otherrisks referenced in our filings with the U.S. Securities and Exchange Commission. For moreinformation on these and other factors, please refer to our Annual Report on Form 20-F filed withthe U.S. Securities and Exchange Commission and to any subsequent reports furnished or filedby us with the U.S. Securities and Exchange Commission.

The forward-looking statements contained in this announcement are made as of the date hereof,and the companies assume no obligation to update any of the forward-looking statementscontained in this announcement.

Wholesale Clients Technology, Operations and Property Services (TOPS) Update Keith Edginton

Documents

operating costssimplify

operating cost reduction

restructure operations

datesourcing strategy

detailed transition

support service provision

key control

service culture