ABN cuts 250 corporate, institutional jobs to lift returns

Amsterdam

STATE-controlled ABN Amro Group NV said it will cut 250 jobs in its underperforming corporate and institutional banking unit, in an effort to boost overall returns.

The bank made the announcement as part of its second-quarter earnings release, in which it reported better than expected developments at its core lending business. That led to net income beating the highest analyst estimate.

The cuts are the result of a review that was flagged by chief executive officer Kees van Dijkhuizen three months ago in the face of what he called "cyclical and structural challenges".

They are consistent with a broader strategy since ABN's rescue by the Dutch state in 2009 after the financial crisis. Since then, the bank has focused on lending to homeowners and businesses closer to its home market in the Netherlands. Wednesday's cuts follow a similar pruning of the private bank last year.

The review was less radical than some had expected, and it was the bank's operating performance that caught analysts' eyes.

"Overall a decent outcome," said Mediobanca analyst Robin van den Broek. He said that while the bottom line was bolstered by one-off factors, underlying profit was still ahead of expectations, and that the drop in provisioning was welcome.

Mr Van den Broek also drew attention to the sharp rise in the bank's core capital ratio, a precondition for a higher dividend. ABN kept its interim payout unchanged, but Mr Van Dijkhuizen hinted at an increase later this year if profits rise as expected.

"We expect capital generation to continue, improving our position to distribute capital in addition to the targeted dividend payout of 50 per cent of sustainable profit," Mr Van Dijkhuizen said.

He added that the planned cuts to the corporate bank unit will strengthen the group balance sheet further, reducing risk-weighted assets by five billion euros (S$7.9 billion). They will cut annual running costs by 80 million euros and the bank will take a charge of 50 million euros to cover the restructuring.

The improved performance may help to improve spirits at the bank whose upper echelons have been in turmoil recently, after a cull of senior management last year and the departure in February of its chairwoman, Olga Zoutendijk. Rumblings of discontent have continued since then, with some employees appealing to the bank's state owners to step in and give firmer leadership. BLOOMBERG