The conversation Flowers & Sluimers

Think Yes, Think Smart & Think Sustainable

THEY HAVE CROSSED PATHS ON MANY OCCASIONS DURING THE HISTORY OF NIBC. CHRIS FLOWERS, CEO OF J.C. FLOWERS & CO AND MAJOR SHAREHOLDER IN NIBC, AND DICK SLUIMERS, CHAIRMAN OF THE SUPERVISORY BOARD OF NIBC, HAVE BEEN CLOSELY CONNECTED TO ONE ANOTHER AND TO NIBC AT VARIOUS TIMES AND IN VARIOUS CAPACITIES. IT NOW SEEMS THAT THEIR PATHS WILL SHORTLY SEPARATE AS A RESULT OF THE PROPOSED TAKEOVER BY BLACKSTONE. THIS IS THE PERFECT TIME FOR JESSICA MORINVILLE, FINTECH & STRUCTURED FINANCE NIBC IN LONDON, TO REFLECT UPON THE HISTORY OF NIBC AND ITS FUTURE IN THE BANKING WORLD WITH THESE TWO GENTLEMEN.

CHRIS FLOWERS

Chris Flowers has been involved in NIBC because in 2005 J.C. Flowers & Co. bought NIBC and is still a big shareholder. Chris Flowers was a member of the Supervisory Board (SB) of NIBC from 2005 to 2009. In 2012, he was reappointed as member of the SB, until today.

Chris Flowers is currently Chief Executive Officer of J.C. Flowers & Co. LLC.

DICK SLUIMERS

Dick Sluimers began to work with NIBC in 1991. First in the SB from 1991 to 1998. And later when NIBC was sold to ABP and PGGM, Dick was a member of the board of ABP and involved with the bank. Due to the sale of NIBC to J.C. Flowers & Co. in 2005, his relationship with the bank came to an end. In 2016, he was reappointed as a member of the SB and since 2019 he is the chairman of the SB.

JESSICA MORINVILLE

Jessica Morinville first joined NIBC’s Structuring department in 2012 in the Hague and rejoined via the London F&SF team in 2019 having since been with the bank in total for over 5 years. She brings 11 years of financial services experience through diverse roles including a bank capital/structured finance hedge fund, microfinance fund and early stage fintechs.

Jessica starts at the beginning: “What were some of the significant moments in NIBC’s development during this time?”

“For me, that was in 1991. At that time, life at the bank was quite different, much simpler,” says Dick Sluimers. “NIBC was a majority government owned bank and worked mainly in consortia with ABN AMRO, Rabobank and banks outside of the Netherlands. Moreover, there was lots of work that came from government programmes. In 1999, the government left and pension funds took over the bank. Subsequently, J.C. Flowers & Co. bought NIBC in 2005 and that changed the bank into a private enterprise. Chris can tell you more about it, because at that point I left.”

Adding to Dick’s story, Chris Flowers says: “At the time that I joined, the bank had already started with its specialisations. The plan was to float NIBC on the stock market. As a result of the financial crisis in 2008, this was postponed for 11 years. But if you look at the figures of 2006 and 2019, you will ultimately notice very few differences. As they say in New York, ‘we made three left hand turns to make a right turn’. Obviously, the NIBC organisation did change. New people joined and new products and services were developed. But, if I look at the culture of NIBC, there too not much has changed. The culture was always and still is enterprising and agile. Now more than ever. The Think Yes mentality truly helps NIBC to grow,” according to Chris.

Jessica has also experienced the crisis and is curious about the agility and culture of NIBC at that time: “What were some of the significant moments in NIBC’s development during this time? For example, the financial crisis obviously had a big impact. And Chris, I know that you played a prominent role across the industry and I’m curious how this was with NIBC.”

Chris relates: “During the crisis, NIBC had good management that ensured relative stability for the bank. A very successful manoeuvre that strengthened this stability was adding retail deposit funding. I looked it up; the start of these activities was on a surprising date: the 9th of September 2008. On 15 September, Lehman Brothers went bankrupt. That made this step very special indeed.”

“As far as I’m concerned, a very important moment for the bank was when it was purchased by J.C. Flowers & Co.,” says Dick. “When the bank was sold to the pension funds, NIBC went from a triple A-shareholder to another. With the takeover by Flowers, the rating changed and the bank really had to function differently. From a strategic point of view, that was a very relevant step, which ensured that NIBC became the enterprising bank that it is today.”

Jessica: “What changed specifically over your time with NIBC? The funding lines were different, but for example, did we operate in the same corporate banking activities as we do now? Or did we focus on other sectors?”

“It was partly the same,” says Dick. “We always examine whether we can earn money from specific corporate financing groups; that becomes a challenge the coming years. The biggest change was the start in the retail business. In terms of strategy, that has been very important.”

“Offering housing mortgages is a good example of this. In addition to offering mortgages for its own balance sheet, these days NIBC also offers this in an intelligent way with its originate-to-manage mortgages”, says Chris.

Jessica is curious to hear about how the interviewees view the current and future situation of the bank: “How do you see the near term future of banking and NIBC’s role in this?”

Chris sees a positive future for NIBC: “European banking has been very difficult for everybody. The biggest factor here is the interest rates. For years now, we have seen falling interest rates and now there are even negative rates. In this context, the results of NIBC are very good. NIBC’s flexible, niche-oriented products work well. Soon, with the possible takeover by Blackstone, NIBC will enter a new period. Such an investor will naturally add something to NIBC, so I see a rosy future. But the interest rates do matter! Interest rates have more impact on NIBC, than who is the company’s owner. I view the interest related developments as the most important factor regarding the future.”

Dick also sees a positive future in spite of the interest rate issue: “Interest rates and increased capital demands indeed make life difficult. To earn money, you must take certain risks, also as a bank. With the help of a new investor such as Blackstone, the position of our bank will change. NIBC will be able to function as a platform for all sorts of activities. In the Netherlands, but perhaps also outside the Netherlands. We are going to have interesting strategy meetings with Blackstone.”

Jessica: “So you view a possible takeover of NIBC as a positive step for the bank, Dick?”

“Certainly,” Dick is very clear on this. “The banking world is going through rough times. We can still make money, but it is not simple to continue doing this in the traditional manner, just look at the share prices of ABN AMRO and ING. If Blackstone takes over NIBC, then that will usher in potential changes. But I have lots of confidence in this. We are and we remain ambitious in the financial sector and a potential takeover will only strengthen this.”

Jessica: “In any case, it will be an interesting period.”

“As a result of the takeover of Blackstone there are of course discussions with De Nederlandsche Bank,” says Dick. “We will move from, a listed bank to a de-listed bank, which will change our position. I don’t think that’s bad, what do you think Chris?”

Chris’ answer is clear: “It gives NIBC the best of two worlds. You are a small enterprise with a huge shareholder, which has lots of capital and knowledge, but with the advantages of a small organisation, the personal attention, short lines, etc. That sounds like a good combination.”

From the perspective of her own function, Jessica is also curious about the vision on fintech: “Do you see fintech as an opportunity or a threat and how should a bank such as NIBC manage this?”

Chris is very direct about this: “I don’t see fintech-lending as a threat. In my opinion, many fintech lending companies are not so successful because they don’t have the customer data or financing of a bank. To be successful in consumer lending, you must be effective with credit, but also with customer acquisition and collections. And to do that well and efficiently, you must have some experience. Sometimes I see that fintech lenders find interesting niches. For NIBC, this can be an opportunity in the area of collaboration, for example.”

Dick gives a nuanced answer: “To what extent this technology could become a serious threat for NIBC, is difficult to predict. We operate in a relatively small market in which relationships mainly play a large role and I don’t see how fintech companies can immediately have a large impact in this type of business. However, data will become more important. Certainly for retail. By using data, we get better insights into the behaviour of our clients and then we can give better service than now. After all, it will be unaffordable to continue serving your clients in the future without the right automation and technology.”

CHRIS

‘‘Interest rates will determine the future of the banking world.”

Jessica: “To close things off and bring the story together, are there any lessons learned from the previous history of the bank which may help us through this current period?”

“The lessons that we learned from the financial crisis in 2008 are very important. That crisis has changed the banks and they now have more capital and better liquidity. The 2008 crisis has better prepared the financial system for current trouble. If we did not have the financial crisis in 2008, the challenges that we now face due to COVID-19 would not be managed as well as they are today,” according to Chris.

Dick endorses this: “I agree. COVID-19 is a really serious problem for the financial world, but the bank is managing it quite well. Another important issue for the future is sustainability. Right now, I see large institutions, such as pension funds, discussing what investing in a sustainable economy means. The perspective of NIBC will also have to entail sustainability. Certainly for the younger generation, sustainability plays a big role. No matter what kind of bank you are, the new generation will ask what you do to solve this problem.”

Jessica: “So, according to you, the enterprising and inventive spirit of NIBC helps it to expand further?”

Dick: “Yes, but also to position the bank, in order to see to what extent we have to look into interesting possibilities regarding sustainable actions. It is not only about Think Yes, but also Think Smart and Think Sustainable. Whether you are a big climate believer or not, it is clear that we have to look for relevant measures, now and in the future. If we are involved in these types of operations, then we can also position ourselves well.”

Dick then turns spontaneously to Chris and says: “I want to emphasise the fact that next to all the work that has put into the bank by the people here in The Hague and elsewhere, it is also thanks to you, Chris, that NIBC has survived the crisis in recent years and is now lean and mean. You have really set the standard for private equity in the Netherlands.”

DICK

‘‘Sustainability plays a major role.”

“In those days, there was quite a lot of discussion about whether a private equity investment was good for a bank,” responds Chris somewhat surprised. “Moreover, we never had the intention of staying for 15 years in NIBC. When we bought the bank, that was not what we planned, but meanwhile the crisis arose and we had to lead the bank through this properly. Incidentally, the management naturally did most of this. I was certainly involved, but most of the work we left for the board.”

Dick completes him: “I think that is the right attitude. As a supervisory director, you do supervising. A supervisor should not be sitting in the chair of a manager. Actually, one of the most important roles of a Supervisory Board is to appoint a good managing board. As supervisory director, you have to ask uncomfortable questions in a constructive manner. That is the correct role and this is the role you have fulfilled with verve in NIBC.”

*In 2020 a merger protocol between NIBC and Blackstone was in effect but the transaction has not closed at the time of the interview.