ABN Amro Q4 earnings beat estimates on Dutch growth, lower provisions

[AMSTERDAM] ABN Amro, the Netherlands' largest domestic lender, on Wednesday posted fourth-quarter net profit of 333 million euros (S$503.2 million), beating expectations due to strong economic growth in the Netherlands.

Analysts polled for Reuters had seen profit at 279 million euros, versus 272 million euros in the same period a year prior.

"Profitability improved on the back of growth in the loan book - mortgages, small and medium enterprise (borrowers) and corporate loans, and significantly lower impairments," said CEO Kees van Dijkhuizen, who replaced Gerrit Zalm on Jan 1.

Notably, loan impairments fell to 35 million euros from 124 million in the fourth quarter of 2015. Net interest income margin improved to 1.53 per cent, from 1.47 per cent.

Mr Van Dijkhuizen noted that growth in the company's mortgage book was the first since 2010 and in the small and medium sector, the first since before the 2008 financial crisis.

The Dutch economy grew 2.1 per cent in 2016 and is expected to accelerate in 2017, though the company noted risks from possible protectionist policies emanating from the new US administration, and fallout from Britain leaving the European Union, as Britain is one of the Netherlands' largest trading partners.

With 80 per cent of ABN's business focused on the Netherlands, it is seeking to grow international lending, focusing on commodities, renewable energy, food supply chain and utility providers.

"We have started on-boarding new clients in these sectors," Mr Van Dijkhuizen said. "This shows that our bank can achieve growth both in the Netherlands and abroad." However, the change will not occur swiftly: ABN said that in the fourth quarter its lending was 79 per cent domestic and 21 per cent international.

ABN continues to hold a large amount of capital: its Tier 1 equity ratio, a common measure of solvency for banks is now at 17 per cent, up from 16.6 per cent at the end of the third quarter.

ABN has argued it needs to hold the money pending new guidance from the Basel committee on how much capital must be held to offset risk-weighted assets, notably mortgages - an issue that affects ABN and its major rivals in the Dutch market, Rabobank and ING.

ABN declared a dividend of 84 US cents per share, from 81 US cents in 2015, in line with its policy of distributing 45 per cent of underlying profit.

The bank remains 70 per cent owned by the Dutch state after its nationalisation during the 2008 financial crisis and re-listing in November 2015.

REUTERS