ABN Amro bolsters capital as Dutch growth drives profit rise

[PARIS] A gain from selling Asian private-banking assets and an expanding Dutch economy helped ABN Amro Group NV reinforce its capital position and more than double quarterly profit.

Net income in the three months through June rose to 960 million euros (S$1.541 billion) from 391 million euros a year earlier, the Amsterdam-based bank said Wednesday.

That beat the 762 million-euro average estimate of four analysts.

ABN Amro booked a 200 million-euro gain after completing the sale of its Asian and Middle East wealth-management operations.

ABN Amro, a global banking giant that became a much slimmer version of its former self after the financial crisis, is refocusing on its home market as the Netherlands' export-oriented economy expands.

Chief executive officer Kees van Dijkhuizen, who took over at the start of the year, is carrying out cost-cutting measures to help counter low rates and plans to update investors on the capital position in the first quarter of 2018, depending on the outcome of talks to define final post-crisis international rules.

ABN Amro's common equity Tier one capital ratio, its core reserves buffer, rose to 17.6 per cent from 16.9 per cent at the end of March.

ABN Amro's CET1 unexpectedly declined in the first quarter as regulators imposed as much as three billion euros of so-called add-ons for operational risks.

"Capital is indeed high," Mr Van Dijkhuizen said in a phone interview.

The bank is anticipating a future CET1 level of 13.5 per cent and will update investors on capital plans early next year if no agreement is reached on Basel IV regulations in 2017.

ABN Amro fell 0.1 per cent to 24.83 euros by 9.57am in Amsterdam trading after fluctuating between gains and losses of about 1.2 per cent.

The stock is up 18 per cent this year, outpacing the 11 per cent increase of the 45-member STOXX 600 Banks Index.

The lender is seeking to lower its cost-to-income ratio, or expenses as a fraction of revenues, to a 56-58 per cent range by 2020 while targeting a return on equity of between 10 per cent and 13 per cent.

The underlying cost-income ratio was 54.9 per cent in the second quarter, compared with 60.2 per cent in the first and 57.2 per cent a year earlier.

The Dutch state, which bailed out ABN Amro in 2008, raised about 1.5 billion euros in June from selling an additional 7 per cent stake in the lender as it moves towards full privatisation.

It currently owns about 63 per cent and plans to gradually sell down its holding. The local economy expanded about 0.4 per cent in the first quarter, the bank said, with expectations that growth accelerated at a faster clip in the three months through June.

"Second quarter GDP figures for the Netherlands are not yet final," the bank said.

"Strong sentiment indicators, however, suggest that growth was more robust than in Q1. In addition, the labour and housing markets have continued to improve. The economy is still showing above-trend growth."

Almost two thirds of the bank's client loans are related to Dutch real estate, where limited supply, high demand and persistently low interest rates have driven up prices.

An improving local economy resulted in the release of reserved net interest income as a higher number of bad loans performed again.

Net interest income rose to 1.6 billion euros, compared with 1.58 billion a year earlier, with the 2017 number only including one month of income from the Asia private banking unit.

Faster Dutch and European growth is "good for our bank," Mr Van Dijkhuizen said.

BLOOMBERG