ABN Amro Slashes Lending for Rough Purchases

RAPAPORT...ABN Amro has scaled back its financing of rough-diamondpurchases, citing a lack of profitability in the manufacturing and tradingsectors. The Dutch bank will only offer credit if the buyer canmake money from the rough, its Antwerp branch said in a letter to clients Friday.It called on the trade to show restraint by purchasing rough only when that is the case. "For some time, we and the industry in general have beenflagging concerns regarding the continued lack of profitability across a widerange of goods in the midstream pipeline," ABN Amro said in the letter, seen byRapaport News. The lender criticized the practice of buying rough tomaintain supply allocations, and argued that thenecessary changes to purchasing practices had not occurred despite it making its views known. Profitability should be determined by "real sales marginsfor goods sold as soon as possible after the purchase of the rough, withoutconsidering credit terms," it added. ABN Amro has shrunk its diamond business in recent years. Last year, it closed its diamond and jewelry lending operations in the US andthe United Arab Emirates. "We remain cautious with respect to this market," TanjaCuppen, the bank's chief risk officer, said in an analyst call on May 15 inresponse to a question about the diamond industry. "It is a market underpressure. You see consolidation, and competition also from 'artificial'diamonds. You see pressure on the sector, and we expect that to remain." Image: An ABN Amro branch in Capelle aan den IJssel, Netherlands. (Shutterstock)